Australian Dollar holds steady as RBA rate hike expectations balance elevated US yields

At the beginning of a new week, the Australian Dollar held steady at 0.7020, showing minimal change from the previous day. The AUD benefits from expectations of further monetary tightening from the Reserve Bank of Australia (RBA) during its meeting on Tuesday. Meanwhile, the US Dollar (USD) gains support due to elevated US Treasury yields.

The RBA is anticipated to raise its Official Cash Rate (OCR) by 25 basis points, increasing the benchmark rate from 4.35% to 4.60%, marking Australia's highest rate level in 15 years. However, the market may have already priced in this increase, focusing instead on the RBA's outlook for future interest rates. On the US side, the Federal Reserve (Fed) raised its policy rate by 25 basis points in September, signaling potential further tightening to curb inflation near its 2% target.

Markets estimate a 70% probability of another US rate increase in October. Geopolitical developments, including the anticipated resumption of indirect talks between the US and Iran under Qatar's mediation, could also impact overall market risk sentiment. The AUD/USD pair currently trades near 0.7023, struggling to break above the 100-hour and 200-hour simple moving averages, indicating a bearish near-term bias. Technical analysis suggests immediate support at 0.7004 and a deeper structural floor at 0.6984.