AUD/USD Forecast: Extra losses likely below 0.6400

The Australian Dollar (AUD) retreated for the third straight session on Tuesday on the back of the ongoing strengthening of the Greenback, causing AUD/USD to slip back to five-month lows in levels just below 0.6400 the figure.

The downward momentum in the Aussie dollar intensified recently due solely to heightened buying activity in the US Dollar (USD), which regained strength following March's higher-than-expected US inflation figures and increasing conviction of a delayed interest rate cut by the Federal Reserve (Fed).

Bolstering the pair’s subdued price action, commodities appear to have halted their recent strong uptick, with copper prices meeting decent resistance around the $840.00 zone and iron ore struggling to push higher despite auspicious results from the Chinese GDP figures for the January-March period.

Regarding monetary policy, the Reserve Bank of Australia (RBA) reiterated its commitment to maintaining current policies in the Minutes of its March meeting. Additionally, futures for the RBA cash rate imply an expectation of approximately 50 basis points of rate cuts in 2024, with the first cut potentially occurring in December.

It's notable that the RBA, alongside the Fed, is now one of the last G10 central banks expected to consider adjusting interest rates this year.

With the Fed maintaining a steadfast approach to tighter monetary policies and the potential for the RBA to embark on an easing cycle later in the year, the AUD/USD faces an increased likelihood of sustained downward pressure in both the short and medium terms.

AUD/USD daily chart

AUD/USD short-term technical outlook

If sellers maintain control and AUD/USD breaches its 2024 bottom of 0.6397 (April 16), the pair could slip back to the 2023 low of 0.6270 (October 26), before the round level of 0.6200.

On the other hand, there is an immediate obstacle at the crucial 200-day SMA of 0.6538 prior to the April top of 0.6644, followed by the March peak of 0.6667 (March 8) and the December 2023 high of 0.6871. Further north, the July top of 0.6894 (July 14) comes ahead of the June peak of 0.6899 (June 16) and the critical 0.7000 mark.

Looking at the bigger picture, the pair is expected to continue its negative trend while maintaining below the crucial 200-day SMA.

On the 4-hour chart, the pair's selling bias appears to be gathering steam. That said, the initial support stands at 0.6397, followed by 0.6338. On the upside, 0.6493 provides immediate resistance before 0.6552. Furthermore, the MACD stayed negative, and the RSI dipped to around 25.