AUD/USD continues its decline from the 0.7248 level observed last week, now approaching the lower boundary of the 0.7100s. Increasing speculation regarding the Federal Reserve’s monetary tightening, coupled with rising oil prices, is exerting downward pressure on the Australian dollar. A decisive breach of the 0.7110 level would validate the onset of a more pronounced correction. The Australian Dollar resumed its downtrend against the US Dollar on Monday, influenced by a risk-off market mood, as Oil prices consolidate above $100, and increasing expectations that the Federal Reserve will raise interest rates on Wednesday.
The AUD/USD has continued its decline from last week’s peaks close to 0.7240, reaching session lows just above the support zone around 0.7110, which is facing increasing pressure as the US session approaches. Investors have increased their expectations for a quarter-point rate hike by the Fed on Wednesday, with the likelihood of another increase before the year concludes, following the release of US Consumer Price Index data on Friday, which indicated that inflation continues to rise at rates significantly exceeding the Fed’s 2% target. Meanwhile, crude oil prices persist above the significant $100 threshold, as developments in the Middle East introduce additional complexities.
A series of attacks on commercial vessels has rendered the Strait of Hormuz nearly impassable, while the Iran-backed Houthis have issued threats to impose a blockade on the Bab el-Mandeb Strait. This has been the alternative route for oil exports from Gulf countries, and its closure would necessitate rerouting shipping through the Suez Canal, thereby significantly increasing freight prices. AUD/USD trades at 0.7128, maintaining a constructive near-term bias; however, a critical support level is currently under pressure around the 0.7110 area. Momentum indicators on intraday charts indicate an increasing bearish trend, with the 4-hour Relative Strength Index (14) approaching oversold conditions, and the Moving Average Convergence Divergence remaining in negative territory. This suggests that any bullish attempts may need to proceed with caution until momentum shows signs of stabilisation.
The region between the low recorded on August 20 at 0.7105 and the low observed on September 2, approximately at 0.7120, represents the lower boundary of the trading range established over the past four weeks, as well as the 38.6% Fibonacci retracement level of the rally from July to September. A sustained break of those levels would clear the path toward the August 19 low at the 0.7065 area, and the August 11 and 13 lows near the 61.8% Fibonacci retracement around 0.7040. Bulls, on the other hand, are likely to be tested at Friday’s high of 0.7187, ahead of the mentioned 0.7240 area.
