AUD/USD Forecast: Holding above the 20-day SMA

AUD/USD Current Price: 0.6750

• The Aussie rose supported by risk appetite and mixed commodity prices.
• The US Dollar maintains a positive tone in the short term ahead of the FOMC meeting.
• The AUD/USD pair rebounded from weekly lows, finding support above the 20-day SMA.

The AUD/USD rose on Monday and posted the biggest daily gain in more than a week, boosted by risk appetite and technical factors. The pair rebounded from a strong support level; however, gains seem limited for the moment ahead of key Australian inflation data and the FOMC meeting.

The Australian July PMI was weak in line with global readings. The Manufacturing PMI rose from 48.2 to 49.6, while the Services PMI fell to 48.0 from 50.3. The Composite index fell to 48.3, the lowest reading since December. The risk looks tilted toward more downside for the next months, considering global central bank tightening and weak data from China.

No data is due from Australia on Tuesday. The next report will be on Wednesday with the Consumer Price Index, a key number ahead of next week's Reserve Bank of Australia (RBA)  meeting. In the short term, price action will likely be driven by the US Dollar as markets turn their attention to the FOMC meeting, which will begin on Tuesday.

The Federal Reserve is expected to raise its key rate by 25 basis points, and many analysts see this as the final hike. The forward guidance will be critical. US data released on Monday showed a larger-than-expected rebound in the S&P Global Manufacturing PMI from 56.3 to 59, while the Services PMI dropped to 52.4, below the market estimate of 54.

AUD/USD short-term technical outlook

The AUD/USD rose on Monday but failed to hold near daily highs, affected by a strong US Dollar. The rebound of the pair was important as it managed to remain above the 20-day Simple Moving Average (SMA). It bottomed on Asian hours at 0.6715 and then climbed to 0.6756. In the daily chart, technical indicators continue to be biased to the downside, but with less conviction. A slide under 0.6700 would clear the way to more losses. On the upside, the Aussie needs to retake 0.6800 to strengthen.

On the 4-hour chart, technical indicators offer mixed signs. Price remains below the 20-SMA. While a recovery above 0.6760 would expose the next resistance at 0.6790, a decline under 0.6720 should lead to a challenge of the 0.6700 area, with risks tilted toward a breakdown. 

Support levels: 0.6715 0.6690 0.6665 

Resistance levels: 0.6760 0.6790 0.6830

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