Australian Dollar continues recent slide ahead of Fed decision

On Tuesday, the Australian Dollar (AUD) continued its recent decline ahead of the Federal Reserve's (Fed) decision meeting. The AUD/USD pair traded near 0.7120, a drop from the four-month high of 0.7200 earlier this month. The US Dollar (USD), as measured by the US Dollar Index (DXY), stayed just below the 100.00 mark, showing strength as traders adjusted positions before the Fed's decision.

The Fed has maintained its target range of 3.50%-3.75% since December 2025, with no change in the past five meetings. Chair Kevin Warsh's recent remarks at the Jackson Hole address suggested that inflation had not shown significant improvement, and a strong August jobs report was expected. Meanwhile, the ADP Employment Change four-week average increased to 16.25K, up from 12.25K, indicating a resilient US labor market.

This positive labor data further fueled expectations of a rate hike and bolstered the Fed's hawkish stance, which could support the US Dollar. On the other hand, US Retail Sales for August were also released, and the outcome would play a crucial role in the Fed's decision. A robust report would support the notion that the US consumer remains strong, providing the Fed with more room to raise rates.

Conversely, a disappointing figure would complicate the hawkish argument just hours before the Fed's statement. Technical analysis of AUD/USD showed the pair trading at 0.7128, below both the 20-period and 100-period Simple Moving Averages (SMA). The pair was stabilizing just above the horizontal support level of 0.7119, with the Relative Strength Index (RSI) near 30, signaling stretched downside momentum but not a confirmed reversal.

Resistance levels were identified at 0.7129, 0.7134, and 0.7141, while support was found at 0.7119. Overall, technical indicators suggested a bearish outlook for the short term.