Australian Dollar rebound offsets the hawkish Fed hike

On Thursday, the Australian Dollar (AUD/USD) rebounded near the 0.7110 level, recovering over 0.40% after recent losses due to speculation of a hawkish Federal Reserve (Fed) hike. This move occurred a day following the Fed's decision to increase its benchmark rate by 0.25% to a range of 3.75%-4.00%, marking its first increase since 2023.

Chair Kevin Warsh indicated the possibility of further hikes before year-end, warning about persistently high inflation. Despite this hawkish stance, the US Dollar (USD) softened rather than strengthened, partly due to political friction between President Donald Trump and the Fed. Trump urged the Fed to cut rates to 1% or less, while Warsh maintained that higher rates were unnecessary.

The White House-US central bank conflict slightly diminished the USD's advantage. Wall Street remained steady, with the S&P 500 and Nasdaq inching higher as the Fed's commitment to controlling inflation reassured investors after previous heavy selling. A surge in gold prices above $4,360 per troy ounce added to AUD/USD's support, as the metal is a commodity-linked currency.

Initial jobless claims fell to 196K, below the expected 208K, signaling a still-tight labor market that bolsters the Fed's hawkish outlook. On the 4-hour chart, AUD/USD trades at 0.7120, retaining a bearish short-term bias under the 20-period and 100-period Simple Moving Averages (SMA). The Relative Strength Index (RSI) is near 44, indicating modest downside momentum.

Resistance lies at the 20-period SMA and a horizontal barrier at 0.7127, with stronger support at the 100-period SMA near 0.7173. On the downside, support appears at 0.7118, followed by the prior floor at 0.7106, with deeper support near 0.7092.