AUD/USD edged lower toward 0.7025 during Friday’s European session as the U.S. dollar recovered some ground ahead of the November 3 midterm elections. The Australian dollar nevertheless retained a modest technical advantage, with the pair holding above its 20-day exponential moving average (EMA) at 0.7013. Stronger Australian inflation has also reinforced expectations that the Reserve Bank of Australia may need to maintain a restrictive policy stance, although resistance near 0.7068 continues to limit the recovery.
US Dollar Gains Ahead of Midterms
The U.S. Dollar Index (DXY), which measures the greenback against six major currencies, traded near 101.82 in the supplied market snapshot. Investors were cautious ahead of the November 3 U.S. federal elections, when control of Congress will be contested. A divided government could complicate the passage of legislation, although executive powers may allow the administration to continue pursuing parts of its policy agenda.
Economic data also provided support for the dollar. The U.S. Bureau of Economic Analysis reported that the economy expanded at a 3.4% annualized rate in the third quarter, accelerating from 2.2% in the previous quarter. Consumer spending, investment and government expenditure contributed to the increase.
The report also showed that the PCE price index rose 2.1%, down from 5.0% in the second quarter. This combination of stronger growth and slower price increases gives investors a more complicated picture of the Federal Reserve’s policy outlook.
Australian Inflation Supports the Aussie
Australia’s latest inflation figures have strengthened the case for caution from the Reserve Bank of Australia (RBA). The Australian Bureau of Statistics reported that annual headline inflation increased to 4.3% in September from 4.0% in August. Monthly CPI rose 0.8% on an unadjusted basis, while the seasonally adjusted increase was 0.6%. Quarterly inflation reached 1.3%.
Underlying inflation also remained elevated, with the annual trimmed-mean measure rising to 3.6%. Persistent price pressures could make it harder for policymakers to consider easing interest rates, potentially supporting the Australian dollar through interest-rate expectations.
AUD/USD Forecast: 0.7013 EMA Holds
On the daily chart, AUD/USD trades near 0.7027, slightly above its 20-day EMA at 0.7013. The Relative Strength Index (RSI) stands at 51.7, indicating modest positive momentum without an overbought signal.
The immediate technical levels are:
- First support: 0.7013, the 20-day EMA.
- Psychological support: 0.7000.
- Initial resistance: 0.7068, the October 29 high.
- Next upside target: 0.7119, the September 23 high.
A sustained move above 0.7068 could strengthen the recovery and expose 0.7119. Conversely, a break below 0.7013 would weaken the near-term bullish structure and bring 0.7000 into focus.
Conclusion
AUD/USD retains a cautiously constructive technical outlook while it holds above the 20-day EMA. However, stronger U.S. data and election-related uncertainty could support the dollar. A clear break above 0.7068 or below 0.7013 is likely to provide the next directional signal.
Sources & Methodology
Primary-source standard: Market-moving facts should link to original data releases, regulator notices, company filings or official project announcements whenever available. Secondary reporting is used for additional context, not as a substitute for original evidence.
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