AUD/USD Forecast: Extra gains remain on the cards near term

AUD/USD rose to four-month highs beyond 0.6700.
The rebound in the Dollar weighed on the pair.
The Australian labour market report came in mixed in April.

Pablo Piovano FXStreet

The mild rebound in the US Dollar (USD) sparked some renewed selling bias in broad risky assets, motivating AUD/USD to return to the negative zone after hitting fresh four-month peaks just above the 0.6700 barrier on Thursday.

Additionally, the USD met some fresh buying orders as investors continued to digest the release of US inflation data tracked by the Consumer Price Index (CPI), which indicated a decline in April. This reinforced investors' anticipation of the potential initiation of the Fed's easing programme in the latter half of the year, most likely at the September 18 meeting.

The subdued US CPI figures aligned with Chief Jerome Powell's earlier statements in the week, where he dismissed the possibility of a rate hike and anticipated subdued inflation throughout the year.

Domestically, the Australian dollar ignored the additional advance in copper prices, contrasting with relatively stable iron ore prices. On the docket, the labour market showed mixed feelings after the Unemployment Rate ticked higher to 4.1% and Employment Change increased more than expected by 38.5K individuals in April.

Regarding monetary policy, the Reserve Bank of Australia (RBA) opted to keep its interest rate steady at 4.35% during its May 7 meeting, maintaining a neutral stance and signalling flexibility. The RBA's economic projections foresee elevated inflation rates until Q2 2025, driven by service price inflation, with an eventual return to the 2%–3% target range by late 2025, reaching the midpoint by 2026.

During the subsequent press briefing, Governor Michele Bullock adopted a balanced stance, suggesting potential rate adjustments but without a definitive commitment.

Currently, the swaps market largely discounts the likelihood of further rate hikes in the next six months, with expectations of a decline in the subsequent period.

Furthermore, both the RBA and the Federal Reserve are anticipated to implement easing measures later than many of their G10 counterparts.

Considering the Fed's commitment to monetary policy tightening and the potential for RBA easing later in the year, sustained upward movements in AUD/USD are anticipated to encounter limitations.

AUD/USD daily chart

AUD/USD short-term technical outlook

Extra gains may cause the AUD/USD to initially try the May high of 0.6714 (May 16) before the December 2023 top of 0.6871 and the July 2023 peak of 0.6894 (July 14), all ahead of the key 0.7000 yardstick.

Meanwhile, occasional bearish attempts could drag spot the interim 100-day and 55-day SMAs of 0.6567 and 0.6548, respectively, before the more significant 200-day SMA of 0.6522, all before dropping to the May low of 0.6465 and the 2024 bottom of 0.6362 (April 19).

Looking at the larger picture, further gains are possible as long as spot continues above the 200-day SMA.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

GBP/USD hits fresh three-month highs above 1.3550

GBP/USD stretches north and refreshes three-month highs above 1.3500 in the European session on Monday. The prevalent US Dollar selling bias favors bullish traders and suggests that the path of least resistance for the pair remains to the upside.

EUR/USD extends gains above 1.1600 on USD weakness

EUR/USD extends its advance above 1.1600 in European trading hours on Monday. The US Dollar resumes its downside amid weaker-than-expected US economic data, shifting Fed expectations and fading geopolitical risk premium.

Gold looks to build strength above $4,400 amid fading Fed hike bets

Gold builds on Friday's bounce from the $4,300 neighborhood and attracts some follow-through buyers at the start of a new week. The commodity is now looking to extend momentum above the $4,400 mark, though it remains below the highest level since June 5, touched last Thursday, amid mixed fundamental cues.

Pepe defends a key support amid mixed retail demand

Pepe is up nearly 2% after a 10% decline last week, showing signs of a mild recovery, while broader crypto market risk appetite remains weak. PEPE derivatives data point to a mixed outlook, as Open Interest declines while funding rates turn positive. Technically, PEPE must hold above its $0.00000255 support floor to avoid a downside of over 10%.

Why the Fed replaced the Treasury buyers who left

When Japan moved to defend the Yen, the arrangement that drew the attention was the Federal Reserve's repo facility for foreign monetary authorities, which lets an approved foreign central bank raise dollars by temporarily handing Treasuries to the Fed rather than selling them into the market. The logic was elegant. Japan gets dollars, the Treasury market avoids a forced seller, and American long rates are spared. Coverage treated it as the mechanism that made the intervention work.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.