AUD/USD is under significant pressure, having hit a 1-1/2-month low on Wednesday, with further downside possible as the U.S. dollar stays firm on expectations that rising energy prices could push the Fed to hike rates more aggressively than the central bank currently projects.

This dollar strength is being driven by diesel prices, which last week traded at their highest level since April 2022, fueling concerns that inflation will run hotter than expected and force additional rate hikes—not just from the Fed but from central banks globally. Broad-based rate hikes threaten to slow global economic growth, which is particularly concerning for Australia given its heavy reliance on global growth dynamics, and this growing risk of a slowdown is helping drag AUD/USD lower.

Technical indicators are reinforcing this bearish outlook. The pair has completed its consolidation phase following the drop from the September 9 daily high, and today's break lower signals resumption of that downtrend.

Adding to the bearish case, AUD/USD has broken below its 55-day moving average, compounding existing negative signals including its position below the 10- and 21-day moving averages, downward momentum shown in daily and monthly RSIs, and September's inverted hammer candle on the monthly chart.

The pair is now approaching the 50% Fibonacci retracement of the 0.6867-0.7238 rally, and a break below this level could intensify selling pressure. Should that occur, AUD/USD may fall further below its 200-day moving average and potentially test June's monthly low.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)