0.6850 area: Australian Dollar finds buyers against US Dollar, outlook still uncertain

• 0.6878 is within reach as the Australian Dollar advances against the US Dollar, despite renewed hawkish Fed bets.
• Fears of a supersized Fed interest rate rise follow stronger-than-forecast US CPI figures.
• 78.2: Australian Consumer Sentiment Index weakens in November.

0.2% is the Australian Dollar’s gain in Wednesday’s Asian trading. The Australian Dollar (AUD) strengthens against the US Dollar (USD) from around 0.6845 to near 0.6878. Outperformance against its peers is lifting the Australian currency and AUD/USD. However, concerns over aggressive monetary tightening by the Federal Reserve (Fed) leave the pair’s prospects uncertain.

Concerns that the Fed could deliver a larger interest rate increase at its December policy meeting have intensified after October’s United States (US) Consumer Price Index (CPI) exceeded expectations.

Tuesday’s Bureau of Labor Statistics (BLS) report put headline Consumer Price Index (CPI) growth at 0.4% Month-on-Month (MoM), above the 0.3% forecast. Core CPI, which strips out volatile food and energy items, registered 0.3% over the same period, exceeding expectations of 0.2%.

Before the US CPI release, Fed Governor Christopher Waller said a “half-point Fed rate hike may be needed in December, if October core CPI inflation comes in around 0.3% or higher.”

The CME FedWatch tool now puts the probability of a 50 basis points (bps) Fed rate increase to the 4.25%-4.50% range at around 9%. That outcome had not been priced in before the figures were released.

The stronger-than-expected US CPI report has also supported US Dollar outperformance. At the time of writing, the US Dollar Index (DXY) is retaining Tuesday’s gains around 102.25.

In Australia, November’s Westpac-Melbourne Institute Consumer Sentiment Index fell to 78.2 from October’s 80.4, marking its lowest reading since late 2022. Higher interest rates and elevated inflationary pressures have eroded Australian consumer sentiment.

0.6881: AUD/USD Technical Analysis Points to Bearish Bias

At 0.6881 on the daily chart, AUD/USD retains a bearish short-term bias. The pair has broken below former rising trend-line support at 0.6910, while the 20-day Exponential Moving Average (EMA) near 0.6962 continues to cap gains. Trading beneath both reference levels suggests rebounds are likely to encounter selling. Meanwhile, the Relative Strength Index (RSI), around 39, remains below the neutral 50 threshold. This signals easing downward momentum, although sellers still hold the advantage.

The former trend-line support around 0.6910 now provides initial resistance. Above it, the 20-day EMA near 0.6962 represents a stronger barrier; a daily close beyond that level would be required to relieve immediate bearish pressure. Below the current price, the absence of clearly defined indicator-based support leaves AUD/USD exposed to additional losses. Traders are likely to look for new price-action support near recent lows to assess whether sellers can strengthen their grip or a corrective rebound is beginning to develop.

(The technical analysis of this story was written with the help of an AI tool. Know more.)