AUD/USD Forecast: Initial contention emerges at 0.6350

Following Monday’s fresh 2024 lows near 0.6350, AUD/USD managed to regain some composure and advance north of 0.6500 the figure on turnaround Tuesday, returning at the same time to the positive territory on the weekly chart.

The AUD’s initial focus, in the meantime, remains on the critical 200-day SMA at 0.6592. While below this region, the negative bias is expected to prevail in the pair.

Tuesday’s marked bounce in the Aussie dollar was also accompanied by an acceptable recovery in both copper prices and iron ore prices, regaining some mild upside traction amidst the ongoing multi-week retracement.

Further strength around the Australian currency came after the RBA delivered a hawkish hold at its meeting early on Tuesday.

Still around the RBA, the bank reiterated to market participants that it is in no hurry to ease policy. In fact, the RBA anticipates that domestic inflation will be more persistent as both trimmed-mean and headline CPI inflation are now projected to approach the midpoint of the 2-3% range by late 2026, as opposed to the June 2026 estimate from the May forecasts.

At her press conference, RBA Governor Michele Bullock noted that “the Board did consider a rate rise” and emphasized that rate cuts are “not on the agenda in the near term.” Bullock also mentioned that expectations for rate cuts are “a little ahead of themselves.”

Overall, the RBA is expected to be the last among the G10 central banks to start cutting interest rates.

Potential easing by the Federal Reserve in the medium term, contrasted with the RBA's likely prolonged restrictive stance, could support AUD/USD in the coming months.

However, sluggish momentum in the Chinese economy might hinder a sustained recovery of the Australian dollar as China continues to face post-pandemic challenges, deflation, and insufficient stimulus for a convincing recovery. Concerns about demand from China, the world's second-largest economy, also emerged following the country's Politburo meeting, where, despite promises to support the economy, no specific new stimulus measures were announced.

AUD/USD daily chart

AUD/USD short-term technical outlook

The resurgence of the bearish tone could see AUD/USD revisit the 2024 bottom of 0.6347 (August 5), ahead of the 2023 low of 0.6270 (October 26).

Bullish attempts, on the other hand, may face first resistance at the significant 200-day SMA of 0.6592, seconded by the temporary 100-day and 55-day SMAs of 0.6601 and 0.6643, respectively, before reaching the July high of 0.6798 (July 8) and the December top of 0.6871.

The four-hour chart shows that some consolidation kicked in. That said, initial support comes at 0.6347, followed by 0.6338 and 0.6270. On the plus side, the initial barrier is at 0.6559, ahead of 0.6610 and the 200-SMA of 0.6649. The RSI rose to around 54.