Australian Dollar finds a floor as Oil retreat loosens USD’s grip

The Australian Dollar recovered some ground versus the US Dollar on Thursday, following the Federal Reserve’s monetary policy decision on Wednesday, which witnessed a 0.25% rate hike and paved the way for further tightening. The AUD/USD trades at 0.7110 after bouncing off the confluence of the 50- and 100-day SMAs.

AUD/USD rebounds from key SMAs as easing Oil tensions pressure Dollar

During the day, market mood turned optimistic on a potential de-escalation of the Middle East conflict. Consequently, Oil prices drifted lower, weakening the Greenback due to its close correlation as Saudi Arabia reported its crude production would return to half capacity within days.

The US Dollar Index (DXY), which tracks the performance of the US currency against six other currencies, is down 0.10%, at 100.23, a day after the Fed raised rates for the first time in three years.

Fed Chair Warsh stated, “The fact is that inflation remains too high and persistent." The Fed's dot plot, which shows officials' interest rate outlooks, indicates the Fed funds rate is around 4.10%, implying another rate hike may occur soon. This aligns with inflation forecasts, as the Personal Consumption Expenditures (PCE) index is projected to stay at 3.7% this year and gradually approach the Fed’s 2% target by 2028.

Money markets had priced in a 53% chance of another rate hike at the October meeting, according to Prime Terminal.

The US economic report indicated that for the week ending September 12, jobless claims decreased notably from 206K to 196K, beating the forecast of 208K. Eyes shift for Friday’s speech of Fed Governor Bowman and the release of Industrial Production data for August.

In Australia, the economic docket was absent, yet the Reserve Bank of Australia (RBA) Governor Michele Bullock is expected to cross the wires at 00:00 GMT.

AUD/USD Price Forecast: Technical outlook