AUD/USD Forecast: Extra gains look likely in the near term

• AUD/USD rose to six-month tops near 0.6730.
• Further retracement in the greenback supported the AUD's bull run.
• Australia’s trade surplus narrowed in May.

AUD/USD gained strong momentum, building on Wednesday’s advance, and extending the recent breakout of the 0.6700 barrier to reach new six-month highs on Thursday.

The continuation of the pronounced rise in spot was driven by another marked sell-off in the US Dollar (USD), as investors kept adjusting to recent disappointing US economic data and its impact on the Fed’s potential timing of interest rate cuts.

Contributing to the robust bounce in the Aussie dollar, both copper and iron ore prices broke out of their multi-week consolidative phase, prolonging their recent move higher.

On the monetary policy front, the Reserve Bank of Australia (RBA), like the Federal Reserve (Fed), is expected to be among the last G10 central banks to start cutting interest rates.

In its recent meeting, the RBA maintained a hawkish stance, keeping the official cash rate at 4.35% and signalling flexibility for future decisions. Still around the RBA, its Minutes from its latest meeting revealed that the decision to hold the policy rate was primarily due to "uncertainty around consumption data and clear evidence of financial stress among many households."

Moreover, the swaps market continues to assign a 25% probability of a rate hike at the upcoming August 6 meeting, increasing to around 50% over the subsequent meetings. Overall, the RBA is in no hurry to ease policy, anticipating it will take some time before inflation is sustainably within the 2-3% target range.

Potential easing by the Fed, contrasted with the RBA's likely extended restrictive stance, could support AUD/USD in the coming months. However, concerns about sluggish momentum in the Chinese economy may impede a sustained recovery of the Australian currency as China continues to face post-pandemic challenges.

On the domestic data space, the trade surplus in Oz narrowed to A$5.773B in May, with exports up by 2.8% and imports rising by 3.9%.

AUD/USD daily chart

AUD/USD short-term technical outlook

If bulls push harder and AUD/USD clears the July high of 0.6733 (July 3), it might test the December 2023 top of 0.6871, before the July 2023 peak of 0.6894 (July 14), as well as the important 0.7000 barrier.

Bearish efforts, on the other side, might send the pair lower, first to the June low of 0.6574 (June 10) and subsequently to the important 200-day SMA of 0.6560. A further decline might result in a return to the May low of 0.6465 and the 2024 bottom of 0.6362 (April 19).

All in all, the uptrend should continue as long as the AUD/USD remains above the 200-day SMA.

The 4-hour chart shows a significant rebound of the positive momentum thus far. Against that, 0.6733 appears to be the earliest barrier, ahead of 0.6759 and 0.6871. In contrast, immediate support is at the 200-SMA of 0.6646, seconded by 0.6574 and 0.6558. The RSI settled just below the 70 yardstick.