Australian Dollar holds above 0.70 as RBA hike becomes a done deal

The Australian Dollar edged 0.10% lower against the US Dollar on Tuesday, as market sentiment took a hit due to dwindling hopes of a US-Iran peace deal. This led to a surge in US bond yields and a downturn in US equity markets. The AUD/USD rate presently sits at 0.7016. In the US, the Dallas Fed manufacturing index declined by 1.8 points to 9.8 in September but still surpassed its long-term average of 0.3.

Geopolitical events and Fed speeches were the main talking points in the news. Federal Reserve Governor Lisa Cook expressed her belief that inflationary pressures would intensify in the upcoming months, primarily due to AI and the US-Iran conflict. She noted that the job market was well-equipped to handle a series of interest rate hikes aimed at curbing inflation.

In Australia, the Reserve Bank of Australia (RBA) is forecasted to increase rates by 25 basis points, from 4.60% to 4.85%, marking the highest level since 2008. ANZ analysts anticipate a divided vote, mostly contingent on the timing and perceived preference for the hike. The market is almost certain about the RBA's decision on September 29, as per Prime Terminal data.

Subsequently, traders will be watching out for Australia's inflation data and the August Trade Balance. Investors in the US are looking forward to job data, the Fed's preferred inflation gauge, Core PCE, and September's Nonfarm Payrolls report. On the daily chart, AUD/USD trades at 0.7017, continuing a bearish near-term trend as it dips below the clustered 100-day and 50-day simple moving averages (SMAs), which currently act as key support levels at 0.7044 and 0.7093, respectively.

The 200-day SMA at 0.6993 serves as a stronger trend support, but the Relative Strength Index (14) nearing 34 indicates ongoing downside pressure, suggesting the pair may be edging towards oversold territory without a decisive recovery. The top resistance level is the 100-day SMA around 0.7044, followed by the 50-day SMA near 0.7093.

A horizontal barrier sits at 0.7198, while a heavier supply zone is marked by a horizontal trend line higher up. On the downside, immediate support is at the 200-day SMA around 0.6993, with several rising trend lines offering additional structural demand on more significant pullbacks, starting from the 0.6865-0.6833 origins.