Bullish Momentum Returns After Consolidation Above Local Support

Summary:

This price action suggests that buyers have continued to defend the area, while the latest rejection provides further indications that a bullish recovery could be developing.

Buy AUDUSD

End Time

CLOSED

0.69622

ENTRY

0.70700

TGT

0.68850

0.70171 -0.00014 -0.02%

134

Points

Profit

0.68850

0.69756

CLOSING

0.69622

ENTRY

0.70700

TGT

Federal Reserve Governor Christopher Waller supports further interest rate increases but warned that they do not necessarily need to occur at consecutive meetings, reinforcing the argument for the central bank to leave rates unchanged in October. His comments suggest that although additional tightening remains an option, policymakers may prefer to assess incoming economic data before deciding on their next move.

St. Louis Fed President Alberto Musalem, who will become a voting member of the Federal Open Market Committee in 2028, stated that inflation remains elevated and that a solid labor market gives the central bank room to focus on bringing persistent price pressures back toward its 2% target. His remarks highlight the ongoing challenge of containing inflation while economic conditions remain relatively resilient.

Meanwhile, initial US jobless claims fell to 197,000 in the week ending October 3, below market expectations for an increase to 200,000. The decline provides further evidence of a labor market characterized by “low hiring and low firing,” suggesting that employers continue to retain workers despite signs of moderation in some areas of the economy.

According to the minutes from the Federal Reserve’s latest meeting, policymakers broadly supported the September rate increase, while most officials considered another hike before the end of the year appropriate. This reinforces the view that inflation remains a central concern, even as markets assess the possibility of a pause at the next policy meeting.

The benchmark US 10-year Treasury yield declined toward 5.27% on Thursday after reaching 5.36% on Wednesday, its highest level since 2002. The pullback in yields comes after a significant advance in borrowing costs, although elevated yields continue to reflect concerns surrounding inflation, monetary policy, and the broader fiscal outlook.

On October 12, the Reserve Bank of Australia (RBA) will release the minutes from its latest policy meeting, followed by employment data two days later. Money markets currently assign a 27% probability to another rate increase to 4.85% at the central bank’s next policy meeting. These upcoming releases could provide further clues about the direction of monetary policy and the resilience of the Australian labor market.

Australian consumer inflation expectations increased to 5.3% in October from 4.9% previously, reaching their highest level in four months. The rise highlights persistent concerns about future price pressures, particularly as global energy costs continue to increase and could place additional pressure on household spending.

Former RBA board member Ian Harper also suggested that another rate increase before the end of the year remains a plausible scenario, although he did not consider it the most likely outcome. His comments reflect the uncertainty surrounding the policy outlook as the central bank balances persistent inflation risks against developments in economic activity. Bullish Momentum Returns After Consolidation Above Local Support_1

Bullish Momentum Returns After Consolidation Above Local Support_1

Technical Analysis

AUDUSD has reacted higher after reaching support levels previously tested in July, located at 0.6913 and 0.6934. The pair recorded a local low of 0.6903 on October 1, before quickly recovering above the lower support level and subsequently consolidating above the higher one. This price action suggests that buyers have continued to defend the area, while the latest rejection provides further indications that a bullish recovery could be developing.

If the pair maintains its position above these support levels, the next potential upside target would be the 50% Fibonacci retracement area, where an additional resistance level is also located. The 100-period and 200-period moving averages are positioned nearby at 0.7097 and 0.7061 respectively, adding further technical relevance to this region. The convergence of these indicators increases the possibility that the area could act as a potential target if bullish momentum continues to build.

In the oscillator area, the RSI is currently trading near 43, recovering steadily after falling to 18 and entering extreme oversold territory. This rebound increases the possibility that sellers may begin taking profits while buyers regain temporary control of the market. Meanwhile, the MACD displays a bullish histogram that is gradually recovering its depth, indicating that upward momentum is improving. The signal lines are also moving rapidly toward the neutral zone, and a bullish crossover would provide additional confirmation of the recovery scenario. For now, the price reaction above key support levels and the improving oscillator readings support the possibility of a corrective move higher.

Trading Recommendations

Trading direction: Buy

Entry price: 0.6960

Target price: 0.7070

Stop loss: 0.6885

Validity: Oct 20, 2026 15:00:00

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