Aussie slips as a firmer greenback, oil and Fed rate hike fears take over

RBA optimism gives way to Fed-driven dollar strength

AUD/USD finished lower last week at 0.7170 (-0.47%), after hitting a four-month high of 0.7237 earlier in the week.

That push higher followed a dual dose of hawkish commentary from Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter and Deputy Governor Andrew Hauser on Tuesday, following firmer consumer price index (CPI) and gross domestic product (GDP) data and bolstering expectations that an RBA rate hike is imminent. Fresh record highs for copper, and iron ore rebounding above $100 per tonne, added further fuel to the fire.

That fire was extinguished soon after as the greenback found support following firmer producer price index (PPI) and CPI data, which lifted the probability of a Federal Reserve (Fed) rate hike this week to around 90%. Risk-aversion flows then compounded the dollar's rally into the end of the week.

AI concerns and Middle East tensions weigh on risk sentiment

That risk-aversion dynamic has carried over into the new week, with Nasdaq futures dropping 1.20% after Anthropic's Dario Amodei called for the artificial intelligence (AI) industry to slow down so safety can catch up, warning that in six to 12 months a misaligned agent swarm could take over the internet.

Adding to the risk-off tone today was a further worrying turn of events in the Middle East over the weekend. The Houthis have pushed down Yemen's Red Sea coast, while last week's drone strikes on the vital East-West pipeline, which pumps Saudi crude to Yanbu as the main Strait of Hormuz workaround, have forced it shut for repairs. That has pushed crude oil 2.5% higher, and the combination has taken AUD/USD down 0.41% today to a low of 0.7138.

Looking ahead, the local calendar is light, so interest will centre on RBA Governor Michele Bullock on Friday at 9.30am AEST, when she testifies before the House of Representatives Standing Committee on Economics.

Offshore, and aside from events in the Middle East, AUD/USD will be heavily influenced by Thursday morning's Federal Open Market Committee (FOMC) meeting, where the Fed is widely expected to raise rates by 25 basis points (bp) to a 3.75% - 4.00% range.

While the Fed could still keep rates on hold, it will want to avoid the violent market reaction that would follow from standing pat when the market is pricing a nearly 90% chance of a hike. The October meeting also comes just ahead of the midterms, and December is a long time to wait.

AUD/USD technical analysis

AUD/USD's decline from the early-May high of 0.7277 found support in late June at 0.6863, just ahead of the then 200-day moving average. The rebound from that low extended again last week, with AUD/USD hitting a fresh four-month high of 0.7237.

The sharp retreat from the 0.7237 high reopens the possibility that the pair is carving out a weekly head and shoulders top (see the weekly chart below). This pattern is very much a big-picture setup and only confirms on a break of neckline support at 0.6880, which would then open 0.6400 as the downside projection.

To negate that downside setup and put the May high of 0.7277 back in play, AUD/USD needs a sustained break above resistance at 0.7240 - 0.7250.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 14 September 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}