• AUD/USD softens to near 0.6965 in Thursday’s early Asian session.
• Fed officials backed the decision in September to raise interest rates, Minutes showed.
• Former RBA board member said November rate hike is “plausible.”

The AUD/USD pair declines to around 0.6965 during the Asian trading hours on Thursday. The US Dollar (USD) strengthens against the Australian Dollar (AUD) after hawkish Minutes from the Federal Open Market Committee (FOMC). The US weekly Initial Jobless Claims report and the Fedspeak will be the highlights later in the day.

According to meeting minutes released Wednesday, Federal Reserve (Fed) officials anticipate they will hike the interest rates again before the end of the year to head off inflation that has run above target for more than five years.

“The FOMC’s minutes reinforced the hawkish tone accompanying the Fed’s September rate hike, with most participants still viewing further tightening as appropriate and almost all seeing inflation risks tilted to the upside at the time of the meeting,” said Westpac analysts.

Last month, Fed policymakers voted to raise the target range for their benchmark rate by a 25 basis points (bps) to 3.75% to 4%, the first increase since July 2023.

Traders are pricing in a roughly 22% odds of another quarter-point hike at the Fed’s October policy meeting, down from around 70% in the days following the September decision.

Former Reserve Bank of Australia (RBA) board member Ian Harper said that further interest rate hike this year is “plausible,” but not necessarily likely. Money markets currently price in a 27% chance of a consecutive rate hike to 4.85% at the next RBA Board meeting, ASX Rate Tracker showed.

AUD recovery stalls as UOB shifts to neutral within tight range

Strategists at UOB Group note that their previously negative view on AUD has faded as the recent sell-off lost momentum and key support levels held. They recall that from the middle of last month they had been bearish, but by last Friday, 02 Oct, with spot at 0.6930, they were already cautioning that “any further decline in AUD may fall short of the major support at 0.6866.”

By Monday, 05 Oct, with spot at 0.6970, UOB observed that “downward momentum is starting to slow, and a break above 0.6985 (no change in ‘strong resistance’ level) would indicate that 0.6866 is out of reach.” The Aussie subsequently rose through that level, reaching a high of 0.6990, confirming that the earlier downside target was unlikely to be tested in the near term.

In light of this price action, UOB now adopts a neutral stance on AUD, expecting it “to trade between 0.6935 and 0.7020” over the coming 1–3 weeks, with the pair seen consolidating within this relatively tight range.

Schmid flags AI-driven inflation, keeps Fed firmly hawkish

Fed’s Schmid delivers a notably hawkish tone, with an 8/10 FXS Speechtracker score modestly above the 7.5/10 historical average, underscoring that the labor market remains solid while inflation is “frustrating” and must be decisively addressed. The emphasis that AI is now one of the largest drivers of inflation, coupled with the warning that Fed credibility is at stake and that short rates may still need further tightening despite higher long-term yields, reinforces a message of persistent inflation risks and a willingness to keep policy restrictive.

The FXS Fed Sentiment Index rises by 0.34 points to 137.91, firmly in hawkish territory and consistent with the slightly stronger-than-baseline tone of this speech. The elevated index level, well above the neutral 100 mark, confirms that Schmid’s remarks add incremental hawkish pressure to expectations for the Dollar and broader Fed policy pricing.

Technical Analysis: AUD/USD maintains a negative outlook in the near term

In the daily chart, AUD/USD keeps a bearish near-term bias as spot holds below the 20-period Bollinger middle band and the 100-day moving average. The pair is sliding along the lower half of the recent range, while the Relative Strength Index (14) at 35.57 hovers just above oversold territory, hinting that downside momentum remains in place but is not extreme.

On the downside, initial support aligns with the 20-period Bollinger lower band near 0.6890, where sellers could pause for consolidation. On the topside, immediate resistance emerges at the Bollinger middle band at 0.7040, followed by the 100-day moving average at 0.7050; a sustained break above these levels would be needed to ease bearish pressure before the upper Bollinger band near 0.7190 comes into view.