Australian Dollar climbs as Fed’s Williams push the brakes on rates
- AUD/USD gains 0.34% as Williams signals limited future Fed tightening.
- RBA minutes leave further rate hikes possible amid persistent inflation.
- Australian employment data takes center stage, with 20K jobs expected.
The Aussie Dollar registers a gain of over 0.34% against the US Dollar on Tuesday as news flows remain quiet, with US data coming mixed, while hostilities in the Middle East continue. The AUD/USD trades at 0.6983.
AUD/USD advances as Fed policy divergence and RBA tightening risks shift market sentiment
US equity markets closed mixed on Tuesday, while the Greenback was on the back foot, being the laggard amongst FX currencies. Dovish comments by New York Fed President John Williams weighed on the Dollar, which retreated after hitting 18-month highs.
Williams said that he has pencilled one rate increase in 2026 but none for the next year. Meanwhile, Regional Fed Bank Presidents Susan Collins and Austan Goolsbee expressed that the labor market is solid and that the AI buildout is driving inflation higher, meaning that further tightening is needed.
US data was mixed, with Existing Home Sales rising 1.5% MoM to 3.99 million in September, exceeding August’s contraction. Jobs data from Automatic Data Processing (ADP) showed that the 4-week average Employment Change cooled from 25.25K to 24.75K.
In Australia, the economic docket remains absent, though the latest Reserve Bank of Australia meeting minutes showed that the high cost of living and further price increases open the door for rate rises.
Ahead, the Aussie economic schedule will feature jobs data on October 15. The economy is expected to add 20K people to the workforce, down from 39.5K in August, and the Unemployment Rate is projected to stay unchanged at 4.6%.
AUD/USD Price Forecast: Technical outlook
In the daily chart, AUD/USD trades at 0.6983, extending a corrective phase below the clustered simple moving averages (SMA) around 0.7087, which keeps the near-term bias bearish. Price holds above the upward support trend line coming off 0.6833, now mapped near 0.6914, while the Relative Strength Index (14) at about 41 suggests soft, but not extreme, downside momentum after the recent retreat from the 0.72 area.
On the topside, initial resistance is seen at the rising trend-line barrier near 0.7077, followed closely by the 50/100/200-day SMA cluster around 0.7087, with a stronger cap at the horizontal level of 0.7198; further up, broader trend resistance waits near 0.7426 and then 0.8866/0.9790. On the downside, immediate support is offered by the trend line around 0.6914, ahead of the prior downward resistance line turned structural floor near 0.6362, where buyers would be expected to defend the broader base if selling pressure deepens.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.