Australian dollar gathers strength after RBA Minutes

• The Aussie dollar is recovering lost ground in Tuesday’s Asian session.
• The RBA’s bullish comments lift the Aussie, but fear of geopolitical risks could limit its upside.
• Investors will keep an eye on Fedspeak later Tuesday.

The Australian dollar (AUD) is trading on a stronger note on Tuesday, snapping a three-day losing streak. The dovish tone of the Reserve Bank of Australia (RBA) after the minutes of the September meeting gives some support to the Aussie. However, risk-off sentiment amid escalating geopolitical tensions in the Middle East could put some selling pressure on riskier assets such as the AUD for the time being.

Looking ahead, investors await Fedspeak later on Tuesday for further impetus ahead of the Federal Open Market Committee (FOMC) minutes. Attention will turn to the US Consumer Price Index (CPI) for September, which will be released on Thursday.

Daily Digest Market Movers: Aussie Gains Ground After RBA Minutes

• According to the minutes of the RBA’s September meeting, published on Tuesday, board members discussed scenarios for lowering and raising interest rates going forward.
• “Policy will need to remain accommodative until policymakers are confident that inflation is moving sustainably towards the target range,” the RBA minutes said.
• The president of the Fed in St. Louis Alberto Musalem noted on Monday that he supports further interest rate cuts as the economy moves forward. Musalem also said performance will determine the path of monetary policy, according to Reuters.
• Minneapolis Fed President Neel Kashkari said Monday he supported the Fed’s decision to cut rates by 50 bps, adding that the balance of risks had shifted from “high inflation to maybe higher unemployment.”
• According to the CME FedWatch tool, markets are pricing in a nearly 85% chance of a 25bps Fed rate cut in November, up from 31.1% last week.

Technical analysis: Aussie dollar retains long-term bullish vibe

The Aussie dollar pair bounces back that day. According to the daily chart, the AUD/USD pair remains stuck in the lower limit of the uptrend channel. The pair maintains the bullish trend as it is well supported above the 100-day exponential moving average (EMA). However, further consolidation or downside cannot be ruled out as the 14-day Relative Strength Index (RSI) is below the midline near 47.0.

The lower boundary of the trend channel near 0.6735 acts as an initial support level for AUD/USD. A breach of the said level could create a bearish momentum that pulls the pair down to the psychological level of 0.6700. The additional downside filter to watch is 0.6622, the 9/11 low.

On the upside, the first upside barrier appears at 0.6823, the August 29 high. Extended gains could pave the way to 0.6942, the September 30 high. A decisive break above this level could attract enough buyers to push AUD/USD to the upper limit of the trend channel at 0.6980.