AUD/USD Price Forecast: Bulls retain control near multi-month top amid divergent RBA-Fed outlook

• AUD/USD spikes to a fresh multi-month peak and draws support from a combination of factors.
• The divergent RBA-Fed policy expectations, along with the risk-on impulse, benefit the Aussie.
• Traders look to the US macro data for some impetus ahead of the PBOC rate setting on Friday.

The AUD/USD pair attracts fresh buying following the previous day's modest pullback and surges to the 0.6830 area, or its highest level since January during the early part of the European session on Thursday. The Australian Dollar (AUD) strengthens across the board in reaction to the upbeat domestic jobs report. The Australian Bureau of Statistics (ABS) reported that the number of employed people rose by 47.5K in August as compared to market expectations for a reading of 25K, while the Unemployment Rate held steady at 4.2%. The data reinforced the view that the labour market remains tight and aligns with the Reserve Bank of Australia's assessment that interest rate cuts are unlikely in the near term. In fact, investors pared the chance for a first easing by the RBA in December to 62% from 75% before the data.

In contrast, the US Federal Reserve (Fed) decided to kick-start the policy-easing cycle and lowered borrowing costs by 50 basis points (bps) on Wednesday. Furthermore, policymakers forecast rates falling by another half of a percentage point by the end of this year and to 3.4% in 2025, down from a prior forecast of 4.1%, before declining to 2.9% in 2026, down from a prior forecast of 3.1%. The new economic projections, meanwhile, revealed that the Fed doesn't see inflation returning to the 2% target before 2026, raising questions about the magnitude of interest rate cuts going forward. Adding to this, Fed Chair Jerome Powell said during the post-meeting press conference that the central bank had no intention of returning to an ultra-low rate regime and that the neutral rate will now be much higher than seen in the past. 

The not-so-dovish outlook dashed hopes for oversized rate cuts by the Fed going forward, which pushed the US Treasury bond yields higher and triggered a goodish USD rebound from its lowest level since July 2023. The recovery, however, runs out of steam amid the upbeat market mood, which tends to undermine the safe-haven Greenback. Apart from this, expectations for more stimulus from China benefit the risk-sensitive Aussie and contribute to the AUD/USD pair's strong move up. Hence, the People's Bank of China's (PBOC) rate setting on Friday should provide some meaningful impetus to the currency pair. In the meantime, traders will take cues from Thursday's US macro releases – Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales – to grab short-term opportunities. 

Technical Outlook

From a technical perspective, momentum beyond the August monthly swing high validates an intraday bullish breakout through the 0.6800 round-figure mark. Furthermore, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for the AUD/USD pair is to the upside. Hence, a subsequent move up towards testing the December swing high, around the 0.6870 region, looks like a distinct possibility. Bulls might then aim to conquer the 0.6900 mark for the first time since February 2023.

On the flip side, any meaningful pullback below the 0.6800 mark is likely to find some support near the 0.6770 horizontal zone. The subsequent fall could drag the AUD/USD pair further, though might still be seen as a buying opportunity and remain limited near the 0.6700 mark. The latter should act as a strong near-term base, which if broken decisively could make spot prices vulnerable to weaken further below the 0.6670-0.6660 confluence – comprising 50-day and 100-day Simple Moving Averages (SMAs), towards challenging the 200-day SMA, currently pegged near the 0.6620 area.

AUD/USD daily chart