Australian Dollar softens on hawkish Fed outlook
The AUD/USD pair loses ground to near 0.7115 during the Asian trading hours on Tuesday. The US Dollar (USD) strengthens against the Australian Dollar (AUD) as the Federal Reserve (Fed) raised interest rates to 3.75%–4.00% and hinted at further hikes before year-end.
The Australian dollar (AUD) slipped to nearly 0.7115 against the US dollar (USD) during Tuesday's Asian trading hours as the US Federal Reserve raised interest rates to a range of 3.75%-4.00% and signaled additional hikes. Fed officials' hawkish remarks heightened expectations for further interest rate increases, bolstering the greenback.
Chicago Fed President Austan Goolsbee stated that the central bank cannot ignore repeated and persistent supply shocks, while St. Louis Fed President Alberto Musalem suggested further rate hikes may be necessary to meet the Fed's inflation target. Traders now estimate a 55.4% chance of a 25 basis point (bps) rate hike at the Fed's October meeting, up from 43.5% a week prior.
Meanwhile, the Reserve Bank of Australia (RBA) is expected to raise its key rate next week due to rising energy prices and upside risks to inflation. Market analysts say the RBA's OIS market now prices a 85% chance of a 25bp hike during the upcoming monetary policy meeting. AUD/USD remains above both the Bollinger Bands lower band and the 100-day simple moving average (SMA), indicating a positive near-term outlook.
The currency is capped by overhead supply and faces resistance at 0.7160, with support at 0.7085 and the 100-day SMA at 0.7075.
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