AUD/USD Price Forecast: Strengthen to near 0.6950, but keeping bearish bias amid oversold conditions

The AUD/USD pair gathers strength to around 0.6940 during the early European trading hours on Friday. Markets might turn cautious later in the day ahead of the key US economic data and escalating conflicts in the Middle East.

Traders will closely monitor the US employment data for September for fresh impetus. Economists expect job growth to slow in September, while the unemployment rate is forecast to stay at 4.1% for the third consecutive month.

If the reports show a stronger-than-expected outcome, this could reinforce the Federal Reserve (Fed) to lift the interest rate, supporting the Greenback.

Markets are now pricing in nearly a 74% odds of the Fed standing pat in October compared to 36% a week earlier, according to the CME FedWatch tool. They still expect a rate hike by the end of the year.

The chance of the Reserve Bank of Australia (RBA) raising interest rates in November has fallen sharply after the latest Consumer Price Index (CPI) came in line with expectations.

Money markets are now betting the Australian central bank will likely leave rates unchanged at its November policy meeting. The probability of a rate hike fell to around 20%, data from LSEG showed.

RBA seen on hold as softer CPI and housing weakness curb Aussie tailwinds

Analysts at Commerzbank argue that the latest data underscore why “1.5 additional rate hikes by the RBA – as the market was still expecting yesterday – are likely to be too much.” One day after the Reserve Bank of Australia’s monetary policy meeting, they note that the CPI figures released today “also show” the case for further tightening has diminished. While acknowledging that “there’s no question that inflation is still too high, and it will take a while before it returns to the middle of the target range,” Commerzbank stresses that “interest rate hikes always take effect with a certain time lag,” particularly in the real estate market, “where building permits fell again in August by 6.1% compared to the previous month and prices in the largest cities continue to decline.” Against this backdrop, they judge that “the RBA would likely be well advised to wait and see how things develop in the coming months,” concluding that “as a result, the AUD is unlikely to receive any further tailwind.”

Logan’s hawkish tilt lifts Fed expectations and supports the Dollar

Fed’s Logan delivered a notably more hawkish message, with a FXS Speechtracker score of 9.2/10 compared to the established baseline of 8.1/10, underscoring a stronger tightening bias. The emphasis that higher yields may reflect increased term premiums, potentially reducing the need for additional tightening, sits in tension with explicit calls for at least 50 bps more in rate hikes and several additional moves to revive price stability, reinforcing a view that policy is not yet restrictive enough despite a strengthening economic expansion and balanced labor market. Overall, the tone points to a Fed willing to push rates higher until inflation is credibly on track to 2%, a backdrop typically supportive for the Dollar and yields.

The FXS Fed Sentiment Index rose by 1.68 points to 136.59, firmly in hawkish territory well above the neutral 100 threshold and consistent with the elevated FXS Speechtracker reading. This move signals that Logan’s remarks have meaningfully reinforced market expectations of further tightening, with the index level indicating a strong bias toward higher rates and sustained support for the Dollar.

Technical Analysis: AUD/USD retains a bearish tone amid oversold conditions

In the daily chart, AUD/USD keeps a bearish near-term tone as price holds beneath the 100-day moving average (MA) and the Bollinger middle band. The pair is now pressing toward the lower Bollinger band support region, while the Relative Strength Index (14) around 28 sits in oversold territory, suggesting that while downside pressure persists, the pace of the recent decline could start to moderate.

On the downside, immediate support is located at the lower Bollinger band near 0.6905, where sellers may begin to lose momentum if the oversold backdrop triggers profit-taking. On the topside, initial resistance appears at the 100-day MA at 0.7060, followed by the Bollinger middle band at 0.7085, with the upper Bollinger band at 0.7265 marking a more distant cap that would need to be reclaimed to challenge the prevailing bearish bias.