- AUD/USD managed to regain some fresh buying interest.
- The pair’s recovery followed modest losses in the Dollar pre-FOMC.
- A deeper retracement could see the YTD low near 0.6360 revisited.
On Wednesday, a resurgence of selling pressure on the US Dollar (USD) prompted AUD/USD to regain some composure and partially reclaim ground lost on Tuesday’s steep pullback.
Simultaneously, the Greenback faced some tepid downward bias as traders remained prudent prior to the FOMC gathering, where the Committee is expected to keep rates unchanged.
Collaborating with the Australian dollar's bounce, iron ore price rose to levels last seen in early March past the $117.00 mark per tonne, while copper prices remained subdued around weekly lows.
In terms of monetary policy, investors are anticipating a rate cut by the Reserve Bank of Australia (RBA) later this year, particularly after inflation figures released last week exceeded expectations. Market sentiment now suggests a 90% likelihood of a 25 bps rate cut in 2024, compared to the approximately 50 bps of easing earlier this month.
Furthermore, both the RBA and the Federal Reserve are expected to commence their easing cycles later than most of their G10 counterparts.
Given the Fed's commitment to tightening monetary policies and the potential for the RBA to initiate an easing cycle later this year, the prospects for sustained gains in AUD/USD are currently viewed as limited.
Additionally, recent Chinese economic data has not provided clear indications of a robust recovery, which is crucial for supporting a significant rebound in the Australian dollar.
AUD/USD daily chart
AUD/USD short-term technical outlook
Extra gains may prompt AUD/USD to revisit the 200-day SMA at 0.6521 ahead of the weekly high of 0.6586 (April 29), an area coincident with the 100-day SMA. North from here aligns the April top of 0.6644, seconded by the March peak of 0.6667 (March 8) and the December 2023 high of 0.6871.
Meanwhile, if sellers seize control, the AUD/USD may retest its 2024 bottom of 0.6362 (April 19), which comes before the 2023 low of 0.6270 (October 26) and the round milestone of 0.6200.
Looking at the big picture, a sustained break above the critical 200-day SMA would most certainly result in more gains.
On the 4-hour chart, spot seems to have regained some upside momentum. That said, the 200-SMA comes at 0.6517 ahead of 0.6644 and 0.6667. On the downside, 0.6465 comes first prior to 0.6362. In addition, the RSI rebounded beyond 44.
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