Aussie extends weekly gains as Fed pause bets offset hawkish rhetoric

The Australian Dollar (AUD/USD) concluded Friday's trading period on a favorable trajectory, increasing by 0.38% and 0.58% weekly, as the US Dollar experienced a slight reduction in its gains. Simultaneously, US data reinforced investors' belief that the Federal Reserve would maintain interest rates steady during the October meeting.

The AUD/USD exchange rate currently stands at 0.6983. Investor sentiment was buoyant on Friday, as Wall Street experienced declines, while US equities neared record highs, buoyed by strong earnings. The US Dollar Index (DXY), which measures the dollar's performance against six currencies, marginally rose by 0.12% to 102.73. US consumer pessimism emerged from the Consumer Sentiment Index, which fell to 46.3, below the anticipated 47.6.

Inflation expectations for both 1-year and 5-year periods increased, with the former rising from 4.6% to 4.7% and the latter from 3.4% to 3.5%. The Federal Open Market Committee (FOMC) minutes indicated broad agreement for a rate hike, although opinions diverged: certain participants viewed it as precautionary, while others perceived it as the beginning of a tightening cycle.

Fed speakers are to address these matters this week. Fed Governor Waller advocates for additional rate hikes, while St. Louis Federal Reserve's Musalem asserts that inflation and a robust labor market necessitate Fed intervention. Market expectations indicate no Federal Reserve rate increase in October, with an 81% likelihood of rates remaining unchanged.

For December, there is an 81% probability of a 25-basis-point increase to the Fed funds rate, according to Prime Terminal data. Over the forthcoming week, Australia's economic calendar will be dominated by the release of the Reserve Bank of Australia (RBA) minutes from its latest meeting. Two days later, employment figures will determine the AUD's direction.

In the US, traders will concentrate on consumer and producer inflation data, Retail Sales, Fed speeches, and employment reports. In the daily chart, AUD/USD is priced at 0.6984, exhibiting a bearish short-term outlook as the price remains below the triple simple moving average cluster near 0.7089. The currency pair is also beneath a significant horizontal support level at 0.7198, implying that rallies may encounter resistance while price is confined under these overhead levels.

The Relative Strength Index (14) near 40 suggests weak but not extreme bearish momentum, indicating a corrective phase rather than extreme capitulation. In the near term, the immediate resistance level is at the 50/100/200-day simple moving averages, clustered around 0.7089, followed by the horizontal line at 0.7198, where prior resistance is expected to resurface.

On the downside, the broader market structure is supported by several rising trend-line supports originating from the 0.68–0.69 range, suggesting that while the short-term bias is bearish, the medium-term uptrend remains intact unless price decisively breaks below these ascending baselines.