Australian Dollar Outlook: AUD/USD Rally Stalls as Fed Risk Returns

Author: Matt Simpson

Date: Sun, 13 Sept 2026

Summary

The Australian dollar (AUD) has experienced a significant loss of momentum after a 10-week rally against the US dollar (USD), primarily due to renewed expectations of a Federal Reserve (Fed) interest rate hike. This shift in sentiment was triggered by a hot US Producer Price Index (PPI) report, which has raised concerns about inflation and the potential for the Fed to increase rates.

Key Points

• Fed Hike Expectations: The probability of a 25 basis point hike by the Fed has surged to 87% following the release of strong inflation data. This has led to a reassessment of market expectations, which had previously leaned towards no hike.
• RBA Concerns: The Reserve Bank of Australia (RBA) is also facing pressure, with recent business sentiment reports indicating negative conditions for the first time in six years. This has led to increased speculation about potential rate hikes by the RBA, possibly as soon as September 29.
• Upcoming Economic Events: The week ahead is crucial for AUD/USD traders, with RBA officials set to speak and provide insights that could reinforce or challenge current market expectations regarding rate hikes.
• Technical Analysis: The AUD/USD pair has shown signs of a potential pullback, with technical indicators suggesting that the recent rally may be losing steam. Key support levels are identified at 0.7120 and 0.7100.
• Market Correlations: The influence of the US dollar on AUD/USD has weakened in the short term, with other factors such as the Chinese yuan and commodity prices playing a more significant role in driving the pair's movements.

Conclusion

The outlook for the Australian dollar remains uncertain as both the Fed and RBA face critical decisions regarding interest rates. Traders should remain vigilant for upcoming economic data and central bank communications that could impact AUD/USD dynamics.