AUD/USD Price Forecast: Bulls remain on the sidelines amid concerns over China, stronger USD

The AUD/USD pair attracts fresh sellers at the start of a new week in reaction to the disappointment over China's fiscal stimulus promised over the weekend and softer inflation figures. China’s Minister of Finance Lan Fo’an signaled more debt issuance amid efforts to shore up the domestic economy and said on Saturday that the central government has a rather large space to increase the deficit. Lan, however, noted such policies are still under discussion and fell short of providing specific details. Adding to this, the official data showed on Sunday that China's consumer inflation unexpectedly eased in September and producer price deflation deepened.

According to the National Bureau of Statistics (NBS), China's headline Consumer Price Index (CPI) rose 0.4% from a year earlier, down from a 0.6% increase recorded in August and short of market expectations. Furthermore, the Producer Price Index (PPI) fell at the fastest pace in six months, by 2.8% year-on-year in September versus a 1.8% decline reported in the previous month and below consensus estimates. The data pointed to weak domestic demand and economic challenges, which tend to undermine demand for the China-proxy Australian Dollar (AUD). Apart from this, a modest US Dollar (USD) strength exerts some pressure on the AUD/USD pair. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands tall near a two-week high as traders now seem to have fully priced out the possibility of another oversized rate cut by the Federal Reserve (Fed) in November. That said, the US central bank is still expected to lower borrowing costs by 25 basis points in November amid indications of labor market weakness. This, in turn, is seen acting as a headwind for the USD and offering support to the AUD/USD pair amid the Reserve Bank of Australia's (RBA) hawkish stance. Hence, it will be prudent to wait for strong follow-through selling before placing bearish bets around the currency pair. 

Technical Outlook

The 0.6700 round-figure mark or a four-week low touched last Thursday, might continue to act as an immediate support. A sustained weakness below will confirm a near-term breakdown through the 50-day Simple Moving Average (SMA) and pave the way for deeper losses. The AUD/USD pair might then accelerate the fall towards the September swing low, around the 0.6625-0.6620 region, en route to the 0.6600 mark and the next relevant support near the 0.6565-0.6560 zone.

On the flip side, any attempted recovery beyond the 0.6760 horizontal resistance is likely to attract fresh sellers and remain capped near the 0.6800 mark. The latter should act as a key pivotal point, which if cleared decisively could lift the AUD/USD pair to the 0.6850-0.6855 area en route to the 0.6880 hurdle and the 0.6900 round figure. The momentum could extend further towards the 0.6940-0.6945 region, or the highest level since February 2023 touched last month. 

AUD/USD daily chart