AUD/USD Price Forecast: Positive Divergence with RSI backs further recovery

The Australian Dollar (AUD) experienced a notable recovery on Friday, climbing 0.22% to around 0.7175 against the US Dollar (USD). This upward movement came after a significant drop the previous day, which was primarily driven by a sharp increase in the US Dollar. The upward trend in the US Dollar was fueled by strong Producer Price Index (PPI) data released for August, indicating that headline producer inflation surged at a faster-than-expected rate to 5.3% Year-on-Year (YoY). The core PPI, excluding volatile food and energy items, also grew as expected at 4.6%.

US PPI data released on Thursday had sparked hawkish expectations from the Federal Reserve (Fed) ahead of the Consumer Price Index (CPI) data release for August, scheduled at 12:30 GMT. In the Australian Dollar (AUD) context, financial markets showed confidence that the Reserve Bank of Australia (RBA) would raise interest rates again in the current year, following warnings of upside inflation risks from Deputy Governor Andrew Hauser on Tuesday.

Analysts at Rabobank noted that the RBA's policy tone had shifted following Hauser's "hawkish speech," which has markets thinking about potential hikes this month and in November. As of the AUD/USD trading price, the pair is currently at 0.7174, maintaining a bullish sentiment as it stays above the 20-day exponential moving average (EMA) at 0.7159. A positive divergence between the price and the Relative Strength Index (RSI) has bolstered the recovery momentum.

On the downside, immediate support for the AUD/USD pair is seen at the 20-day EMA around 0.7160, with 0.7100 being the next key level. Looking ahead, the pair aims to regain its four-year high near 0.7280.