AUD/USD Price Forecast: Immediate resistance emerges at the 200-day SMA

• AUD/USD puts the 0.6600 barrier to the test on Monday.
• Markets remained sidelined ahead of key releases on the US docket.
• The Australian labour market report will be the salient event this week.

AUD/USD resumed its uptrend and rapidly left behind Friday’s knee-jerk, returning albeit briefly beyond 0.6600 the figure in quite an auspicious start to the new trading week.

Meanwhile, the Aussie dollar's key focus remains on the critical 200-day SMA, currently at 0.6595, as a decisive break above this level is crucial to reinstating a more positive outlook for the pair.

Monday’s significant rebound in the pair coincided with a broad-based recovery in the commodity sector, marked by a decent increase in copper prices, while iron ore prices attempted a mild bounce as well.

Investor sentiment towards the Australian currency was further bolstered by the Reserve Bank of Australia's (RBA) recent decision to maintain its current policy stance. The RBA emphasized its cautious approach, indicating that it is not in a rush to ease policy with expectations that domestic inflation will be more persistent. Both trimmed-mean and headline CPI inflation are now projected to approach the mid-point of the 2-3% range by late 2026, rather than the previous estimate of June 2026.

During her press conference, RBA Governor Michele Bullock mentioned that the Board considered a rate hike and highlighted that rate cuts are not on the horizon. She also pointed out that expectations for rate cuts are premature.

Further comments by Bullock later in that week reiterated that the central bank would not hesitate to raise interest rates if needed to control inflation, underscoring a hawkish stance as underlying inflation remains elevated. She highlighted that the bank's board remains vigilant about the risks of rising inflation, following the decision to keep interest rates unchanged earlier in the week. Core inflation, which was 3.9% last quarter, is expected to decrease to the target range of 2% to 3% by late 2025.

Overall, the RBA is likely to be the last among the G10 central banks to begin cutting interest rates. Potential easing by the Federal Reserve (Fed) in the medium term, contrasted with the RBA's expected prolonged restrictive stance, could support AUD/USD in the coming months.

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

Of note, Chinese inflation figures saw a mild uptick in July, both in the monthly and yearly CPI, while Producer Prices also came in a tad above estimates.

Meanwhile, non-commercial traders (speculators) remain largely net-short on the AUD, according to CFTC data, mostly in response to the utter absence of signs of life from China. Banning the two-week hiccup in positioning seen in mid-July, net shorts have prevailed since Q2 2021.

AUD/USD daily chart

AUD/USD short-term technical outlook

Further rises should cause the AUD/USD to challenge the significant 200-day SMA of 0.6595, along with monthly highs just past 0.6600. Once this region is cleared, spot could move onto the transitory 55-day SMA of 0.6638, before the July top of 0.6798 (July 8) and the December peak of 0.6871.

The AUD/USD may retest the 2024 bottom of 0.6347 (August 5), ahead of the 2023 low of 0.6270 (October 26), as negative sentiment returns.

The four-hour chart shows some consolidative move in the short-term horizon. That said, the initial support is at the 55-SMA of 0.6534, followed by 0.6347, and then 0.6338. On the upside, the initial resistance level is at 0.6605, which comes before 0.6610 and the 200-SMA of 0.6639. The RSI eased to around 57.