The AUDUSD pair kicked off the week at around 0.70000. However, the Aussie is still stuck under the heel of a strong US dollar, even as anticipation grows for another interest rate hike by the Reserve Bank of Australia.
What's the biggest event on the calendar? The RBA's September 29 meeting. Traders have pretty much locked in a 25‑basis‑point increase to 4.60%, potentially the fourth this year. The reason is simple: inflation that refuses to cool. The core Consumer Price Index (CPI) reading is standing near 3.6%, well above the regulator's target range. This means that monetary policy has to stay tight, which is generally good news for the Aussie.
Now, here's where things get tricky. The Federal Reserve is the real roadblock for AUDUSD. After its September move, the US central bank keeps hinting that more needs to be done on inflation. As a result, the market is now putting the odds of another hike in late October above 70%. All the while, 10‑year Treasury yields have punched above 5.2%—a level we haven't seen in about 20 years—and the US Dollar Index is nearing two-month highs.
So, where does this leave the pair? The scales still tip in favor of the greenback. The RBA monetary tightening has already been baked into prices. Elevated Treasury yields and the Fed's hardline stance keep the dollar in demand. Consequently, even a hawkish RBA decision might only provide limited support for the Aussie unless the American regulator's rhetoric softens in tandem.
The final recommendation:
— Sell the AUDUSD pair at the current price (0.70000), targeting 0.68500 within one month.
— To shield your position from adverse market movements, place a Stop Loss order at 0.70900.
This content is for informational purposes only and is not intended to be investing advice.
