AUD/USD Forecast: Corrective upside could be only temporary

The selling pressure in the Australian Dollar (AUD) lost traction on Monday and sponsored a decent rebound in AUD/USD to the 0.6450-0.6455 band after two daily pullbacks in a row.

The pair’s positive price action came despite modest buying pressure on the US Dollar (USD), as investors kept unchanged a potential delay in interest rate hikes by the Federal Reserve (Fed), potentially to the September meeting.

Meanwhile, daily gains in the Aussie dollar came amidst a broad-based, improved appetite for risk-linked assets in response to diminishing geopolitical fears. Also accompanying the uptick in spot emerged a decent bounce in iron ore prices and a humble decline in copper prices, despite hitting fresh tops near $850.00 for the first time since March 2022.

In terms of monetary policy, the Reserve Bank of Australia (RBA) reiterated its commitment to maintaining current policies in the Minutes of its March meeting. Market sentiment currently suggests a 90% chance of a 25 bps rate cut in 2024, compared to the approximately 50 bps of easing observed earlier this month.

It's worth noting that both the RBA and the Fed are among the final G10 central banks expected to consider interest rate adjustments this year.

With the Fed maintaining a firm stance on tightening monetary policies and the possibility of the RBA beginning an easing cycle later in the year, AUD/USD is likely to face sustained downward pressure in the short and medium terms.

Moreover, recent Chinese economic data has not provided strong indications of a lasting recovery, which is necessary to support a significant rebound in the Australian dollar.

AUD/USD daily chart

AUD/USD short-term technical outlook

If sellers maintain control and the AUD/USD goes below its 2024 low of 0.6362 (April 19), spot may retest its 2023 bottom of 0.6270 (October 26) before reaching the round milestone of 0.6200.

On the other hand, there is an immediate block at the critical 200-day SMA of 0.6530, which comes before the April high of 0.6644, followed by the March top of 0.6667 (March 8) and the December 2023 peak of 0.6871. Further north, the July high of 0.6894 (July 14) is slightly ahead of the June top of 0.6899 (June 16) and the critical 0.7000 level.

Looking at the broader picture, the pair is projected to continue its downward trend while remaining below the important 200-day SMA.

On the 4-hour chart, the pair extends its rebound from recent yearly lows. Nonetheless, the initial support is 0.6362, followed by 0.6338. On the upside, 0.6456 offers immediate resistance before 0.6493. Furthermore, the RSI revisited the 50 region.