The Australian Dollar recovers some lost ground in Tuesday’s Asian session.
The hawkish remarks of the RBA lift the Aussie, but the fear of geopolitical risks might cap its upside.
Investors will keep an eye on the Fedspeak later on Tuesday.
The Australian Dollar (AUD) trades on a stronger note on Tuesday, snapping the three-day losing streak. The hawkish tone of the Reserve Bank of Australia (RBA) after the September Meeting Minutes provides some support to the Aussie. However, the risk-off sentiment amid the escalating geopolitical tensions in the Middle East might exert some selling pressure on riskier assets like the AUD for the time being.
Looking ahead, investors await the Fedspeak later on Tuesday for fresh impetus ahead of the Federal Open Market Committee (FOMC) Minutes. The attention will shift to the US Consumer Price Index (CPI) for September, which will be released on Thursday.
Daily Digest Market Movers: Australian Dollar gains ground after the RBA Minutes
According to the RBA September Meeting Minutes released on Tuesday, the board members discussed scenarios for lowering and raising interest rates in the future.
"Policy will need to remain restrictive until Board members are confident inflation is moving sustainably towards the target range,” noted the RBA Minutes.
St. Louis Fed President Alberto Musalem noted on Monday that he supports additional interest rate cuts as the economy moves forward. Musalem further stated that the performance will determine the path of monetary policy, per Reuters.
Minneapolis Fed President Neel Kashkari said on Monday that he supported the Fed's decision to cut rates by 50 bps, adding that the balance of risks shifted from "high inflation towards maybe higher unemployment.
According to the CME FedWatch Tool, the markets have priced in nearly an 85% chance of 25 bps Fed rate cuts in November, up from 31.1% last week.
Technical Analysis: Australian Dollar keeps the bullish vibe in the longer term
The Australian Dollar pair rebounds on the day. According to the daily chart, the AUD/USD pair remains stuck within the lower limit of the ascending trend channel. The pair maintains the bullish bias as it is well-supported above the key 100-day Exponential Moving Average (EMA). Nonetheless, further consolidation or downside cannot be ruled out as the 14-day Relative Strength Index (RSI) is located below the midline near 47.0.
The lower limit of the trend channel near 0.6735 acts as an initial support level for AUD/USD. A breach of the mentioned level could create a bearish momentum that drags the pair down to the 0.6700 psychological level. The additional downside filter to watch is 0.6622, the low of September 11.
On the upside, the first upside barrier emerges at 0.6823, the high of August 29. Extended gains could pave the way to 0.6942, the high of September 30. A decisive break above this level could draw in enough buyers to push AUD/USD to the upper boundary of the trend channel at 0.6980.
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