FX.co ★ AUD/USD. Price Analysis. Forecast. Strong US Data Outweighs the RBA Rate Hike

At the time of writing on Thursday, AUD/USD fell to around 0.6916, losing roughly 0.50% on the day. The Australian dollar is losing ground against the US dollar despite this week's Reserve Bank of Australia (RBA) decision to raise the key policy rate. Rising US Treasury yields are pressuring the Australian currency and supporting the US dollar.

On Tuesday, the RBA raised the key rate by 25 basis points to 4.6%. This was the fourth 25 bp hike this year. RBA Governor Michelle Bullock also hinted at the possibility of further tightening as the bank aims to bring inflation back to the 2% target.

However, trade data released on Thursday point to a weakening economic situation in Australia. The country's trade surplus plunged from AUD 1.351 billion in July to AUD 495 million in August. Imports rose 5.8% after a 2.4% decline the previous month, while exports grew 3.7% after a 3.6% drop.

Pressure on AUD/USD is largely linked to the US dollar's strength, supported by rising Treasury yields. At the time of writing, the 10-year US Treasury yield stands near 5.24%, having earlier reached about 5.34% — the highest since 2002.

Fresh US data also confirm the resilience of the American economy. Initial jobless claims for the week ending September 26 fell to 197k (from 198k the prior week), below the 201k forecast. Continued claims decreased by 11k to 1.701 million.

The ADP report showed private-sector employment rose by 90k in September, above the 70k forecast and up from 36k in August. The US Q2 GDP estimate was also revised up to 2.2% annualized from the previously reported 1.5%.

Manufacturing activity remains elevated. The ISM manufacturing PMI for September slipped slightly to 54.5 from 54.6 in August, missing the 55.0 expected. Key components, however, remain solid: the employment index rose to 52.7, and new orders climbed to 55.3. The prices-paid index jumped sharply from 71.1 to 77.9, signaling ongoing price pressures.

The combination of steady economic activity and persistent inflationary pressure gives the Federal Reserve room to maintain a hawkish policy. However, expectations of further tightening eased somewhat after Wednesday's core PCE data came in more moderate than expected. According to the CME FedWatch tool, markets now price the probability of a rate hike at the October 27–28 meeting at about 36%.

Thus, high US Treasury yields and the prospect of prolonged tight US monetary policy support the US dollar and weigh on AUD/USD despite the recent RBA rate increase.

From a technical standpoint, AUD/USD remains bearish: the recent break below the key 200-day EMA favors bears. Quotes also remain well below the 100-period simple moving average and the 200-period SMA, which further supports the bearish case. Oscillators are negative, confirming the bears' advantage. The RSI is in oversold territory, indicating a potential corrective bounce, but any correction is likely to be limited.