AUD/USD Forecast: Immediately to the upside comes 0.6714

• AUD/USD jumps to monthly highs past 0.6700.
• The US Dollar sold-off following disappointing US CPI data.
• The Federal Reserve left its interest rates unchanged, as expected.

The persistent sell-off in the US Dollar (USD) lent further wings to the Australian dollar, encouraging AUD/USD to make a sharp change of course and revisit the key resistance area around the 0.6700 level on Wednesday.

The greenback's retracement was mainly driven by softer-than-estimated CPI readings in May, which re-ignited speculation of two rate cuts by the Federal Reserve (Fed) for the remainder of the year.

Speaking about the Fed, the central bank matched consensus and left its interest rates unchanged at 5.25%–5.50% at its two-day meeting on Wednesday.

Adding to the upbeat sentiment around the Aussie dollar, Chinese inflation figures came in short of expectations, contracting by 0.1% MoM in May and rising by 0.3% over the last twelve months.

In the meantime, an extra decline in iron ore prices came in contrast to a rebound in copper prices.

Regarding monetary policy, the Reserve Bank of Australia (RBA), like the Fed, remains among the last major central banks to adjust its stance. Recent RBA Minutes indicated that officials are considering possible interest rate hikes if inflation rises.

Currently, money markets are predicting about 20 bps of easing by May 2025, with potential rate hikes still possible in August and September. Supporting this outlook, the RBA's Monthly CPI Indicator (Weighted Mean CPI) increased more than expected in April, rising to 3.6% from 3.5%.

Given the prospects of the Fed easing its monetary policy later in the year vs. the likelihood that the RBA will maintain its restrictive stance for an extended period, AUD/USD should face a period of potential gains in the relatively short-term horizon.

Next on tap on the Australian calendar will be the release of the labour market report for the month of May and the Consumer Confidence gauge tracked by Westpac, all due on June 13.

AUD/USD daily chart

AUD/USD short-term technical outlook

The revival of the upward bias may push spot to revisit its May peak of 0.6714 (May 16), followed by the December 2023 high of 0.6871 and the July 2023 top of 0.6894 (July 14), all before the key 0.7000 barrier.

Occasional bearish efforts may send the AUD/USD to the crucial 200-day SMA of 0.6540, ahead of the May low of 0.6465 and the 2024 bottom of 0.6362 (April 19).

Overall, gains are expected if the price stays above the 200-day SMA.

The 4-hour chart now shows a sharp pick-up of the upward bias. That said, 0.6714 comes first seconded by 0.6728 and 0.6759. On the downside, the 200-SMA at 0.6620 comes first ahead of 0.6574 and 0.6557. The RSI rose past 71.