Australian Dollar edges up against US Dollar ahead of US flash PMI data

The Australian Dollar (AUD) trades marginally higher at around 0.7018 against the US Dollar (USD) during the European trade on Friday. The Aussie pair ticks higher as the Australian Dollar outperforms amid firm expectations that the Reserve Bank of Australia (RBA) will hike interest rates against this year.

Aussie climbs as RBA warning sharpens focus on inflation data

Analysts at Commerzbank note that the Aussie “received further support from a significant rise in interest rate expectations,” with AUD-USD pushed to its highest level since late September after comments from RBA Deputy Governor Andrew Hauser. Hauser described the inflation outlook as “materially worse” than the RBA had previously expected and warned of a potential “de-anchoring of inflation expectations,” remarks that have sharpened market attention on upcoming price data.

According to Commerzbank, Hauser highlighted survey evidence showing that “a growing share of businesses believe that inflation of 3-3.5% is ‘the new normal’.” With the RBA’s long-term inflation target set at 2-3%, the bank argues this is “certainly be concerning,” particularly as “trimmed-mean inflation most recently stood at 3.6%, further above the target range.”

Commerzbank stresses that this backdrop “makes the inflation data due on 28 October all the more important.” In its August forecasts, the RBA had already expected “headline inflation to fall to 3.6% and trimmed-mean inflation to 3.3% by December,” and the upcoming release “should at least provide indications that inflation is indeed moving in that direction.” The bank cautions that if “price pressures remain similarly elevated or even intensify, however, this would validate the recent rise in rate-hike expectations and cement the risk of another rate move at the RBA’s meeting on 3 November.”

On the US Dollar front, investors await the preliminary United States (US) S&P Global PMI data for October, which will be published at 13:45 GMT. Both the manufacturing and services PMI are expected to have increased again, but at a moderate pace.

As of writing, the USD Index trades 0.1% higher to near 101.75. The DXY bounces back after revisiting the three-week low of 101.44 posted on Thursday.

Going forward, the major trigger for the US Dollar will be the Federal Reserve’s (Fed) monetary policy announcement next week. The Fed is expected to leave interest rates unchanged in the 3.75%-4.00% range.

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades at 0.7019. The pair holds marginally above the 20-day exponential moving average (EMA) at 0.7001, giving the near-term tone a mildly bullish bias as price defends this dynamic floor. The Relative Strength Index (RSI) at 51.5 sits just above the neutral line, hinting at stabilizing momentum after the recent recovery from oversold territory rather than an outright impulsive rally.

On the downside, immediate support is seen at the 20-day EMA around 0.7001, with the 0.7020/0.7020 area acting as the nearby pivot where price opened today, a loss of which would weaken the constructive bias and expose deeper consolidation. With no clear overhead technical levels in the current dataset, further gains would likely depend on whether buyers can continue to defend the EMA base and push the pair away from the 0.70 handle, keeping the broader recovery structure intact.