• Initially, the greenback rallied due to escalating Middle East tensions.

• Markets are pricing a higher 59% chance of a massive November Fed cut.

• All eyes are on the US core PCE price index, due on Friday.

The AUD/USD outlook indicates increased bullish optimism as the dollar loses ground due to increased Fed rate cut expectations. Meanwhile, the Australian dollar rose despite data showing weaker labor demand.

Initially, the greenback rallied as escalating Middle East tensions drove investors to buy the safe-haven currency. The conflict between Hezbollah and Israel in Lebanon has escalated, raising fears of a wider war. The two groups fired missiles at each other on Wednesday, dampening risk appetite.

However, market participants still paid attention to Fed rate cut bets. According to futures markets, there is a higher 59% chance that the US central bank will cut interest rates by 50-bps at the November meeting. Such a dovish outlook is bearish for the dollar, allowing the AUD/USD pair to climb.

All eyes are now on the US core PCE price index due on Friday. It is a key measure of inflation for the Fed and might impact future policy moves. Economists expect inflation to increase by 0.2%, as in the previous month. A smaller-than-expected number will boost rate-cut bets. On the other hand, a jump could reduce expectations for a massive cut and increase those for a smaller one.

Meanwhile, in Australia, job openings in the three months to August fell as demand for labor cooled. Vacancies fell by 5.2% after the last reading showed a 3.5% decline. The report might add pressure on the RBA to consider near-term rate cuts.

AUD/USD key events today

• US final GDP q/q
• US unemployment claims
• Fed Chair Powell Speaks

AUD/USD technical outlook: RSI pauses while bulls make higher highs

On the technical side, the AUD/USD price is climbing after failing to trade below the 30-SMA. The bullish bias remains strong with the price above the SMA and the RSI above 50.

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However, while the price is making higher highs, the RSI has stalled. This is a sign that bulls might be tired. Therefore, they might fail to push the price above the 0.6900 resistance. That would create a double top that could lead to a reversal. However, if there is a surge in momentum, the price will likely make a new high above0.6900.

https://www.forexcrunch.com/blog/2024/09/26/aud-usd-outlook-dollar-reverses-on-dovish-fed-outlook/