Australian Dollar consolidates above 0.6900/multi-month low vs USD ahead of Fed's Warsh

The AUD/USD pair struggles to capitalize on the previous day's modest bounce from sub-0.6900 levels, or the lowest since early July, oscillating in a range during the Asian session on Friday. Spot prices currently hover around the 0.6920-0.6925 region as investors now look to US Federal Reserve (Fed) Chair Kevin Warsh's speech.

Warsh's remarks at the Annual Meetings of the International Monetary Fund (IMF) and World Bank Group, in Bangkok, will be looked upon for more cues about the Fed's future policy path amid the energy-driven acceleration in US inflation. The outlook, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide a fresh impetus to the AUD/USD pair. Heading into the key event, traders have been pricing in over a 90% chance that the US central bank will raise borrowing costs at its December policy meeting.

Furthermore, US bond yields seem to have stabilized following the previous day's steep decline, which, along with escalating tensions in the Middle East, helps revive demand for the safe-haven USD and acts as a headwind for the AUD/USD pair. In the latest developments around the Middle East crisis, the Iran-backed Houthi group carried out a deadly missile attack on the presidential palace in the Yemeni government's interim capital of Aden. This keeps the geopolitical risk premium firmly in play and backs the case for further USD appreciation.

The Australian Dollar (AUD), on the other hand, might struggle to gain any meaningful traction as traders continue to scale back expectations for further interest rate hikes by the Reserve Bank of Australia (RBA) amid signs that the domestic jobs market has cooled significantly. In fact, the Australian Bureau of Statistics (ABS) reported on Thursday that the number of employed people declined by 39.3K in September, missing estimates of a 20K increase by a big margin, while the Unemployment Rate unexpectedly edged higher to 4.7% from 4.6% in August.

The aforementioned fundamental backdrop suggests that the path of least resistance for the AUD/USD pair remains to the downside. Hence, any subsequent move up could be sold into and is more likely to remain limited. Nevertheless, spot prices seem poised to register modest weekly losses, which would mark the fourth week of a negative close in the previous five.

AUD/USD 4-hour chart

Technical Analysis

The AUD/USD pair keeps a bearish near-term bias below the 100-period Exponential Moving Average (EMA) on the 4-hour chart. The pair’s inability to reclaim this overhead dynamic barrier suggests rallies remain capped for now, with price action leaning toward a corrective phase after failing to sustain the recent push above 0.7000.

The said handle defines the first hurdle for any recovery attempt. On the downside, bears might now wait for acceptance below 0.6900 mark before positioning for any further depreciating move. Nevertheless, the broader structure favors selling into strength as long as the AUD/USD pair trades beneath the 0.6991 resistance zone.