• AUD/USD managed to partially reverse the recent weakness.
  • The key 200-day SMA around 0.6545 is the next target.
  • No further rate hikes, according to the RBA Minutes.

The slight downward pressure on the US Dollar (USD) prompted a decent rebound in AUD/USD on Tuesday, rebounding from the area of recent four-week lows near 0.6480.

In line with the daily recovery of the Aussie dollar came the continuation of the uptrend in copper prices, which rose to levels last seen in late April 2023, and the small bounce in iron ore prices after finding some contention near the key $100.00 mark per tonne recently.

Meanwhile, the economic situation in China is also expected to impact the AUD. Potential stimulus measures by both the government and the PBoC may offer temporary relief, but sustained improvements in economic indicators are needed to strengthen the Australian currency and potentially initiate a significant uptrend in AUD/USD.

Back to the Reserve Bank of Australia (RBA), the Minutes from its March meeting affirmed that the central bank has abandoned its inclination towards tightening monetary policy. In contrast to the February meeting, there was no deliberation regarding the possibility of raising the cash rate target at the March gathering. Instead, the members agreed that it was appropriate to describe the policy outlook as one in which it is challenging to definitively anticipate future adjustments to the cash rate target. RBA cash rate futures still imply a projection of slightly under 50 basis points of policy rate cuts in 2024.

It is worth recalling that the RBA is among the last G10 central banks expected to consider interest rate adjustments this year.

Given the differing timelines for monetary policy adjustments between the RBA and the Fed, the Australian dollar may gather momentum later in the year, potentially leading to further appreciation in AUD/USD. If the pair surpasses the December 2023 peak of 0.6871, it could aim for a significant level of 0.7000 in the short term.

AUD/USD daily chart

AUD/USD short-term technical outlook

Further upward momentum in the AUD/USD should challenge the key 200-day SMA at 0.6544 prior to the provisional 100-day SMA at 0.6596. Once this region is cleared, spot could revisit the March peak of 0.6667 (March 8) ahead of the December 2023 high of 0.6871 (December 28). Further north align monthly tops of 0.6894 (July 14) and 0.6899 (June 16), all before the critical 0.7000 barrier.

If sellers regain control, the pair could hit the so-far April low of 0.6480 (April 1) ahead of the March low of 0.6477 (March 5), followed by the 2024 low of 0.6442 (February 13). Breaking below this level may lead to a test of the 2023 low of 0.6270 (October 26), prior to the round level of 0.6200 and the 2022 low of 0.6169 (October 13).

Looking at the big picture, the pair is projected to restore its bullish momentum once it decisively surpasses the crucial 200-day SMA.

On the 4-hour chart, the pair appears to have regained its upward momentum after dropping to the 0.6480 zone. Against this, there is temporary resistance at the 55-SMA of 0.6531, which is ahead of the 200-SMA of 0.6547 and 0.6559. However, fresh losses may drive the pair to revisit 0.6480, then 06477, and finally 0.6442. Furthermore, the MACD remained bearish, with the RSI rising to around 49.

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