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AUD/USD Price Forecast: Bulls might aim to challenge 200-day SMA, around 0.6470 area

  • AUD/USD advances to a fresh YTD peak on Monday amid sustained USD selling bias.
  • US recession fears and Fed rate cut bets continue to weigh heavily on the Greenback.
  • Hopes for a US-China trade deal benefit the Aussie and remain supportive of the move.

The AUD/USD pair regains positive traction following Friday's modest downtick and climbs beyond the 0.6400 mark, touching a fresh year-to-date during the first half of the European session. The severe nature of US President Donald Trump’s international trade policies has raised the possibility of a US recession. Moreover, Trump's back-and-forth tariff announcements have dented confidence in the world’s largest economy and caused an extended decline in the US Dollar (USD). In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, dives to its lowest level since April 2022 and turns out to be a key factor acting as a tailwind for the currency pair.

Meanwhile, the USD bulls largely shrugged off Federal Reserve (Fed) Chair Jerome Powell's hawkish remarks last week, saying that the central bank is well-positioned to wait for more clarity before making any changes to the stance of policy. In contrast, the markets have been pricing in the possibility that the Fed will resume its rate-cutting cycle in June and lower borrowing costs by a full percentage point by the end of this year. This further contributes to the heavily offered tone surrounding the USD. Adding to this hopes for a US-China trade deal provide an additional boost to the Australian Dollar (AUD) and remain supportive of the intraday move higher to the 0.6430 region.

Trump earlier this month kickstarted a bitter trade war with China and imposed tariffs of up to 145% on certain Chinese goods, with some duties reportedly reaching 245%. China retaliated with 125% duties on US goods and imposed new export licensing restrictions on seven rare earths. Trump, however, signaled last Thursday a potential end to the tit-for-tat tariff hikes between the world's two largest economies and expressed optimism that they could reach a deal. The supporting factors, to a larger extent, overshadow bets that the Reserve Bank of Australia (RBA) will lower interest rates at its upcoming meeting in May and support prospects for a further appreciation for the AUD/USD pair.

There isn't any relevant market-moving economic data due for release from the US on Monday, leaving the USD at the mercy of Chicago Fed President Austan Goolsbee's scheduled speech. Apart from this, trade-related developments might influence the buck and provide some impetus to the AUD/USD pair. The focus, however, will remain glued to the release of flash PMIs, which could offer fresh insight into the global economic health and drive the broader market risk sentiment. Nevertheless, the aforementioned fundamental backdrop favors the USD bears and suggests that the path of least resistance for the currency pair remains to the upside.

AUD/USD daily chart

Technical Outlook

From a technical perspective, an intraday breakout above the 0.6400 mark and a subsequent move beyond the 50% Fibonacci retracement level of the September 2024-April 2025 downfall could be seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart have been gaining positive traction and are still away from being in the overbought territory, validating the near-term constructive outlook for the AUD/USD pair. Hence, some follow-through strength towards challenging the very important 200-day Simple Moving Average (SMA), currently pegged near the 0.6470 area, looks like a distinct possibility. The momentum could be extended towards the 0.6500 psychological mark before spot prices eventually climb to 61.8% Fibo. level, around the 0.6540-0.6545 region.

On the flip side, the 0.6400 round figure now seems to act as an immediate strong support. Any further pullback could be seen as a buying opportunity near the Asian session low, around the 0.6365-0.6360 region. This should help limit the downside near the 0.6300 mark or the 38.2% Fibo. level. Failure to defend the said support levels might prompt some technical selling and drag the AUD/USD pair to the 0.6245 intermediate support en route to sub-0.6200 levels. This is followed by the next critical support near the 0.6130 region or the 23.6% Fbo. level. A convincing break below the latter will shift the bias back in favor of bearish traders and pave the way for deeper losses.

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Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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