AUD/USD Price Forecast: 0.7125 Slips as Fed Decision Puts Dollar in Focus

The AUD/USD pair is trading around 0.7125, with the Australian dollar under modest pressure as traders await the Federal Reserve’s September policy decision. The U.S. dollar remains firm, with the Dollar Index near 99.70, close to a two-week high. Markets are widely expecting the Fed to raise rates by 25 basis points, but the updated projections and Chair Kevin Warsh’s guidance are likely to determine the next major move in the currency pair.

Fed Decision Puts AUD Under Pressure

The Federal Reserve is expected to lift its policy rate by 25 basis points to 3.75%-4.00%, marking the first U.S. rate increase since July 2023. Market pricing puts the probability of that move above 90%, meaning the decision itself is largely reflected in the dollar’s current valuation.

Attention is therefore shifting to the Fed’s updated economic projections and the so-called dot plot, which shows policymakers’ expectations for future interest rates. A projection pointing to additional increases could reinforce the dollar, while a less aggressive path could limit further gains.

Commerzbank analysts have argued that the latest upside surprise in inflation increases the likelihood of a rate hike, while stressing that the market reaction will depend heavily on the future policy path. Higher U.S. rates can increase the relative appeal of dollar assets and weigh on currencies such as the Australian dollar.

The broader bond-market backdrop is also relevant. U.S. 10-year Treasury yields recently moved above 5%, while Australian 10-year yields climbed to around 5.41%, keeping global fixed-income markets highly sensitive to central-bank policy expectations.

• AUD/USD: Around 0.7125
• DXY: Near 99.70
• Fed hike expectation: 25 bps
• Expected Fed range: 3.75%-4.00%

Key AUD/USD Levels Under Watch

On the technical side, AUD/USD remains below its 20-period exponential moving average near 0.7152. This keeps the short-term structure mildly bearish and suggests that recent rebounds are meeting resistance around the moving average.

The Relative Strength Index (RSI) is near 48, slightly below the neutral 50 mark. That reading points to fading upside momentum but does not indicate that the pair has reached oversold territory.

A daily close above 0.7152 would ease the immediate downside pressure and provide room for a corrective recovery. By contrast, a sustained break below the September 14 low at 0.7108 would expose the 0.67050 area.

Current market analysis from FXStreet places immediate support around 0.7125, followed by 0.7108 and the 100-day SMA near 0.7080. On the upside, resistance is concentrated around the 20-day SMA near 0.7170, with the upper Bollinger Band near 0.7230 providing a higher barrier.

RBA Outlook Adds Another Variable

The Australian side of the equation is also becoming important. Markets are pricing a high probability of another Reserve Bank of Australia rate increase later in September, with expectations centered on a move from 4.35% to 4.60%. Persistent underlying inflation has strengthened expectations for further policy tightening.

That outlook could provide some support for the Australian dollar if Australian yields continue rising relative to U.S. yields. However, broader risk sentiment, commodity prices and China’s economic performance also remain important for the currency because Australia is heavily exposed to global commodity demand and China’s economy.

The immediate catalyst remains the Federal Reserve decision and Warsh’s commentary. A hawkish message could keep AUD/USD below 0.7152, while softer guidance could allow the pair to recover toward the 0.7170 area.

Conclusion:

AUD/USD remains near 0.7125 as traders await the Federal Reserve’s rate decision and updated policy projections. The expected 25-basis-point hike is largely priced in, making the Fed’s guidance the key dollar catalyst. Technically, 0.7152 is the first resistance level, while 0.7108 and 0.7050 define the main downside references. The pair’s next sustained move will depend on the balance between U.S. monetary tightening expectations and Australia’s own rate outlook.