Australian Dollar Dips as Strong US Dollar Persists
The Australian Dollar (AUD) has retreated from its earlier gains, dropping to around 0.6964 against the US Dollar (USD) during Tuesday’s European trading session. This decline comes as the USD strengthens, supported by rising US bond yields. The Federal Reserve’s September signal of one more interest rate hike this year has bolstered the USD, making it the strongest performer against major currencies like the Canadian Dollar.
The US Dollar Index (DXY) is trading 0.15% higher near 102.25, nearing its annual high of 102.54. Surging yields on US-backed securities, driven by persistent inflation concerns, continue to underpin the USD. Despite some correction in oil prices, inflation projections remain elevated, keeping the Fed’s hawkish stance intact. Fed officials have emphasized the need to address inflation, though they have tempered the urgency of further rate hikes.
From a technical perspective, AUD/USD is trading at 0.6962, holding a bearish near-term bias. The pair remains below the 20-day Exponential Moving Average (EMA) at 0.7035, suggesting that rallies are still capped. The Relative Strength Index (RSI) at 34 indicates that while selling momentum may be easing, downside pressure persists. Immediate resistance is located at the 20-day EMA, while the absence of nearby support leaves the pair vulnerable to further declines.
Investors are now awaiting the release of the Federal Open Market Committee (FOMC) minutes from the September policy meeting, set for Wednesday. These minutes could provide further insights into the Fed’s future interest rate policy, which remains a key driver for the USD’s strength.