AUD/USD Price Forecast: Struggles to lure buyers, remains at the mercy of USD price dynamics

• AUD/USD retreats from a multi-day top amid the emergence of fresh USD buying on Monday.
• The initial market reaction to PBOC’s rate cut turns out to be short-lived amid a bullish USD. 
• The fundamental backdrop supports prospects for an extension of a multi-week downtrend.

The AUD/USD pair attracts fresh sellers following an intraday uptick to the 0.6720-0.6725 region on Monday and for now, seems to have stalled a two-day-old recovery move from over a one-month low touched last week. The latest optimism over the launch of two funding schemes on Friday aimed at supporting the development of capital markets and slightly more than-expected rate cuts by the People's Bank of China (PBOC) boosted investors' confidence. This, along with hawkish Reserve Bank of Australia (RBA) expectations, bolstered by last week's robust domestic employment details, provided a modest lift to the Australian Dollar (AUD) during the Asian session. 

That said, the emergence of fresh US Dollar (USD) buying keeps a lid on any further appreciating move for the AUD/USD pair. The USD Index (DXY), which tracks the Greenback against a basket of currencies, regains positive traction at the start of a new week and reverses a part of Friday's retracement slide amid bets that the Federal Reserve (Fed) will proceed with rate cuts. In fact, the markets seem convinced that the US central bank will lower borrowing costs by 25 basis points (bps) in November. This keeps the yield on the benchmark 10-year US government bond elevated above the 4.0% threshold and revives the USD demand amid persistent geopolitical risks. 

Meanwhile, recent polls indicate a close contest between Donald Trump and Vice President Kamala Harris, adding a layer of uncertainty. This could further benefit the Greenback's relative safe-haven status, supporting prospects for the resumption of the AUD/USD pair's recent corrective decline from the 0.6940-0.6945 region, or its highest level since February 2023 touched last month. There isn't any relevant market-moving economic data due for release on Monday, leaving spot prices at the mercy of the USD price dynamics and geopolitical developments. Furthermore, speeches by influential FOMC members could produce short-term trading opportunities around the pair.

Technical Outlook

From a technical perspective, the recent breakdown and acceptance below the 50-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been gaining negative traction and are still away from being in the oversold territory, suggesting that the path of least resistance for the AUD/USD pair is to the downside. Any further decline, however, is likely to find some support near the 0.6660-0.6655 region ahead of the very important 200-day SMA, currently pegged near the 0.6625 area. A convincing break below the latter will reaffirm the negative outlook and drag spot prices below the 0.6600 mark, towards the next relevant support near the 0.6565 zone.

On the flip side, the Asian session peak, around the 0.6720-0.6725 region, now seems to act as an immediate hurdle. Any subsequent move up is likely to attract fresh sellers and remain capped near the 0.6750-0.6760 region. That said, a sustained strength beyond the latter might trigger a short-covering rally and lift the AUD/USD pair to the 0.6800 mark. The momentum could extend further towards the 0.6820-0.6825 region en route to the 0.6900 round figure.

AUD/USD daily chart