AUD/USD Forecast: Further advance appears on the cards

Fresh selling pressure in the US Dollar (USD) bolstered the recovery in the risk-associated universe, encouraging AUD/USD to reclaim the area beyond 0.6600 the figure on Thursday.

Meanwhile, the USD halted its upside impetus following discouraging weekly results from the labour market, while declining US yields also collaborated with the corrective decline, all against the backdrop of an economic landscape consistent with the expected initiation of the Fed's easing program before the end of the year, likely around September.

Additionally, the Australian dollar managed to bypass a marginal advance in copper prices vs. a marked pullback in iron ore prices, which continued to retreat after recent peaks near the $120.00 zone per tonne.

Shifting focus to domestic developments, it's important to note that the Reserve Bank of Australia (RBA) opted to keep its interest rate unchanged at 4.35% during its early Tuesday event. Furthermore, the bank reiterated its neutral policy stance, stating that "the Board is not ruling anything in or out." The RBA updated its macroeconomic projections, forecasting higher headline and trimmed mean inflation rates up to Q2 2025, primarily driven by ongoing service price inflation. However, the bank expects inflation to return to the 2%–3% target range in the latter half of 2025 and reach the midpoint by 2026.

During the subsequent press conference, Governor Michele Bullock maintained a balanced stance. Regarding interest rates, she noted that "we might have to raise, we might not," indicating the board's consideration of rate hikes at the current meeting.

At present, the swaps market has largely discounted the possibility of further rate hikes over the next six months, with a decrease priced in for the subsequent six months.

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

Given the Fed's commitment to tightening monetary policy and the potential for RBA easing later this year, sustained gains in AUD/USD are expected to be limited.

AUD/USD daily chart

AUD/USD short-term technical outlook

Extra gains may cause the AUD/USD to revisit its May high of 0.6647 (May 3), which is slightly below the March top of 0.6667 (March 8) and comes ahead of the December 2023 peak of 0.6871.

Meanwhile, if bears regain the initiative, the pair may test the key 200-day SMA at 0.6519 before dropping to the May low of 0.6465 and the 2024 bottom of 0.6362 (April 19).

Looking at the larger picture, as long as spot trades above the 200-day SMA, more gains should be coming.

On the four-hour chart, the buying momentum looks to have regained traction. That said, initial resistance comes at 0.6647 prior to 0.6667. On the downside, immediate support comes at 0.6557 ahead of the 200-SMA at 0.6524 and the 100-SMA at 0.6519. Additionally, the RSI rebounded to approximately 58.