Australian Dollar stays pressured vs USD; holds above 0.7050 as traders await Fed decision

AUD/USD attracts some sellers for the second straight day, though it lacks bearish conviction.
The US-Iran peace deal optimism keeps the USD bulls on the defensive and supports the pair.
The RBA’s hawkish bias further limits losses for the Aussie as traders await the FOMC decision.

Haresh Menghani FXStreet

The AUD/USD pair struggles to capitalize on the previous day's hawkish Reserve Bank of Australia (RBA)-inspired bounce and trades with a negative bias for the second consecutive day on Wednesday. Spot prices, however, hold above the 0.7050 level as traders opt to wait for the outcome of a two-day FOMC policy meeting before placing fresh directional bets.

The US Federal Reserve (Fed) is scheduled to announce its policy decision later during the US session and is expected to leave policy rates unchanged while removing the easing bias amid a sticky inflationary environment. Meanwhile, the market focus will be on the accompanying policy statement and updated economic projections, which include the so-called dot plot. Adding to this, the new Fed Chair Kevin Warsh's comments during the post-meeting press conference will be scrutinized for fresh cues about the future policy path. This, in turn, will play a key role in driving the US Dollar (USD) demand and providing some meaningful impetus to the AUD/USD pair.

Heading into the key central bank event risk, the optimism over an interim peace deal between the US and Iran keeps the safe-haven USD on the back foot. In fact, the US and Iran agreed to a framework intended to end the war that began earlier in 2026. The initial memorandum of understanding (MOU) establishes a 60-day ceasefire, the reopening of the Strait of Hormuz, and sets the stage for technical negotiations over Iran's nuclear program. This keeps the USD close to the weekly low, set on Monday, which, along with the Reserve Bank of Australia's (RBA) hawkish signals, acts as a tailwind for the Australian Dollar (AUD) and limits losses for the AUD/USD pair.

The RBA opted to pause the tightening cycle and keep its cash rate unchanged at 4.35% to assess the impact of previous hikes. The central bank, however, warned that further rate hikes are possible if inflation remains stubbornly elevated. This, in turn, makes it prudent to wait for strong follow-through selling before positioning for an extension of the AUD/USD pair's recent corrective decline from the 0.7275-0.7280 region, or a nearly four-year peak touched last month.

Economic Indicator

Interest Rate Projections - 1st year

At four of its eight scheduled meetings, the Federal Reserve (Fed) releases a Summary of Economic Projections, or ‘dot-plot’. This shows each member of the Federal Open Market Committee’s (FOMC) forecast for where they expect the federal funds rate (the interest rate at which banks lend to each other) will go in the future. It can have a major impact on the US Dollar (USD), particularly if members change their forecasts. It is widely used as a guide to figure out the terminal rate and the possible timing of a policy pivot.

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