FX.co ★ Wiking | AUD/USD

AUD/USD is quoted slightly higher at 0.7018 in European trade on Friday. The AUD/USD pair advances as the AUD outperforms on strong expectations that the Reserve Bank of Australia (RBA) will raise interest rates this year. Analysts at Commerzbank say the Australian currency "benefited from an even stronger rise in interest rate expectations," with AUD/USD reaching its strongest levels in several weeks after comments from RBA Deputy Governor Andrew Hauser. Hauser explained that the inflation picture is "considerably worse than what was foreseen" by the RBA, warning of "a de-anchoring of inflation expectations." According to Commerzbank, Hauser said survey data suggested that "an increasing proportion of firms view an inflation rate of 3-3.5% as 'the new normal'." With the RBA's long-term inflation target at 2-3%, Commerzbank claims this will "surely go to raise eyebrows", especially since "trimmed-mean inflation was last recorded at 3.6%, well above target." In this context, it says "inflation data due out on 28 October is all the more significant." According to Commerzbank, "in the RBA's August forecasts, headline inflation is expected to drop to 3.6% and trimmed-mean inflation to 3.3% by December", and, in this regard, "the data due to be released should give us at least some indication that this is where inflation is heading." Commerzbank also says that "if price pressures remain as high or even pick up steam, however, this will only serve to justify the rise in rate-hike bets seen in recent weeks." The US Dollar is awaiting the preliminary United States (US) S&P Global PMI report for October. The report will be released at 13:45 GMT, and both manufacturing and services PMIs are projected to have improved, though only moderately. At press time, the USD index is up by 0.1% to 101.75. It bounces back from testing the three-week low of 101.44 seen on Thursday. Looking ahead, the US Dollar will receive its impetus mainly from the monetary policy statement from the US Federal Reserve (Fed). In the monetary policy statement, the Fed is expected to maintain interest rates at 3.75%-4.00%. According to the daily chart, the AUD/USD is trading at 0.7019. The currency pair currently trades marginally above the 20-day EMA at 0.7001, giving the short-term bias a mild bullish edge as price defends the dynamic support level. With RSI at 51.5 slightly above the neutrality line, momentum is likely to stabilise after the recent recovery from oversold conditions. The first immediate resistance for AUD/USD is the 20-day EMA at 0.7001, while the 0.7020/0.7020 region is the nearest pivot since price started trading from here today. With no clear overhead technical resistance in the current dataset, any upside move could depend on buyers holding the EMA support level and moving away from the 0.70 handle.