AUD/USD closed higher on Friday at 0.7171, up 0.38%, yet it still ended the week 0.45% lower as rising expectations of a Fed rate increase next week underpinned the US Dollar. Price action remained constructive on the day, but weekly performance showed the pair losing ground as market pricing tilted towards tighter US policy.
Technically, the pair finished the week under pressure, though the daily chart points to possible consolidation. The Relative Strength Index (RSI) remains bullish, keeping the door open to gains, but bulls need a break above the September 9 doji high at 0.7237 to extend the move. That would expose the May 6 high at 0.7277, with 0.7300 then in view. On the downside, a drop below the September 11 low of 0.7150 would refocus attention on 0.7100, ahead of the 100-day Simple Moving Average (SMA) at 0.7080 and the 50-day SMA at 0.7066.
Volatility Ahead Of Fed Decision
We see the AUD/USD pair starting the coming weeks under pressure despite a late Friday recovery to 0.7171. Derivative traders should prepare for heightened volatility as markets price in a high probability of a Federal Reserve interest rate hike at the upcoming meeting. This shifting sentiment has already dragged the pair down by 0.45% over the past week, boosting the US Dollar index to its highest level in months.
For those looking to take bullish option or futures positions, we advise waiting for a clean break above the September 9 doji high of 0.7237. Successfully breaching this level could quickly open the doors toward the May peak of 0.7277, with the major 0.7300 level acting as the next target. This upward momentum is currently supported by the daily Relative Strength Index (RSI), which suggests buyers still have some control.
Key Levels And Rate Differential In Focus
Conversely, if the pair drops below the September 11 low of 0.7150, we recommend shifting to bearish strategies. Such a breakdown is highly likely to push prices toward 0.7100, where the market will test key buyer defense lines. Further slides will target the 100-day Simple Moving Average at 0.7080, followed by the 50-day average at 0.7066.
This delicate technical setup comes as recent US core inflation steadying at 2.6% keeps pressure on the Fed to maintain high rates. Meanwhile, Australia’s latest employment data shows a resilient job market with unemployment holding steady at 4.1%, giving the Reserve Bank of Australia less room to cut rates. We believe this interest rate gap between the two countries will be the main driver of AUD/USD price action in the near term.
