Key Points
- AUDUSD advanced 0.29 percent to 0.6642, supported by a hawkish RBA hold
- Markets are pricing in an 89.4 percent chance of a 25 basis point Fed cut this week
The Australian dollar strengthened on Tuesday, with AUDUSD rising to 0.6642 as traders responded to a steady hand from the Reserve Bank of Australia.
The RBA left its cash rate unchanged for a third straight meeting, matching market expectations. However, it surprised some by offering few signals that easing was on the horizon.
RBA Governor Michele Bullock said in a press conference that further rate cuts were not needed, citing concerns that domestic inflation could remain persistent.
This hawkish tone helped lift the Aussie against the US dollar, which is trading defensively ahead of the Federal Reserve’s policy meeting.
Fed Decision in Focus
Global markets are now focused on the Federal Reserve’s upcoming decision. Fed funds futures suggest an 89.4 percent chance of a 25 basis point rate cut this week, with another two cuts priced in for 2026.
However, expectations have cooled slightly following speculation that potential Fed chair nominee Kevin Hassett may take a less dovish stance.
The US dollar index (USDX) was flat near 99.04, while US 10-year Treasury yields held steady at 4.17 percent. Traders are cautious ahead of the Fed’s dot plot update and Chair Jerome Powell’s remarks, which could influence the path of rates and the dollar heading into the first quarter of 2026.
Technical Analysis
The Australian dollar is edging higher, with AUDUSD trading at 0.66423, breaking above the key short-term resistance around 0.6600.
This marks a continuation of the recent rebound from the 0.6450 support zone, with price now approaching the multi-month range top near 0.6706, last tested in late September.
The short-term moving averages (5, 10, 30) are now in bullish alignment, with the 5-day MA steepening, showing accelerating momentum.
This is further supported by a strong MACD crossover above the signal line, and a rising green histogram, both pointing to increasing buying strength.
A decisive daily close above 0.6650–0.6670 would open the door to retest 0.6706, and a breakout beyond that could signal the start of a broader trend shift toward the 0.6800 area. On the downside, 0.6580 and 0.6525 serve as near-term support levels.
Cautious Forecast
AUDUSD may continue to grind higher in the near term if the Fed delivers a dovish cut and Powell’s remarks signal flexibility on future easing. A break above 0.6700 could open the door toward 0.6755.
However, any surprise hawkish shift from the Fed or a rise in US yields may cap gains and push the pair back toward support near 0.6570.
Traders should monitor Powell’s tone closely, alongside US CPI and China policy headlines in the coming sessions.
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