AUD/USD Forecast: Outlook could deteriorate further below the 200-day SMA

Sellers won’t just let go. Extra weakness hurt the Aussie dollar and motivated AUD/USD to extend the negative performance for the second session in a row on Tuesday, exacerbating the gloomy start of the new trading week.

As usual in past sessions, the movement of the greenback and the lack of clear indications of a strong economic recovery in China in the post-pandemic period are predicted to continue influencing the sentiment surrounding the Australian dollar (AUD) and keeping its price action relatively muted. Additionally, this is expected to be combined with a projected decision by the Reserve Bank of Australia (RBA) to maintain its current policy stance at its meeting in February. Together, these factors are likely to maintain AUD under pressure for the time being, leaving the door wide open to extra retracements.

The decline in inflation metrics observed in December, along with the continued moderation of the labour market (albeit still relatively tight), seems to have solidified the consensus among market participants that the RBA would keep its rates on hold.

However, the short-term outlook for the Aussie dollar leans towards a more dovish stance. This perspective could gain further momentum if the Federal Reserve continues to delay expectations of an interest rate reduction in the coming months, while the absence of any recovery in the commodity complex, particularly copper prices and iron ore, also adds to this discouraging picture.

Early on Wednesday, preliminary January Judo Bank Manufacturing and Services PMIs are due, seconded by Westpac’s Leading Index for the month of December.

AUD/USD daily chart

AUD/USD short-term technical outlook

Further weakness in AUD/USD might test the 2024 low of 0.6524 (January 17), which appears underpinned by the interim 100-day SMA at 0.6516. The loss of this zone should find its next support not before the 2023 low of 0.6270 (October 26). If bulls recover control, there is a first obstacle at the provisional 55-day SMA at 0.6624 before the December 2023 peak of 0.6871 (December 28), which comes before the July 2023 high of 0.6894 (July 14) and the June 2023 top of 0.6899 (June 16), all of which occur before the important 0.7000 yardstick.

According to the 4-hour chart, there is a reasonable contention area around 0.6525. If this zone is breached, no major disagreement exists until 0.6452. The MACD remains negative, with the RSI dropping to around 40. The bullish trend, on the other hand, may encounter first resistance at the 55-SMA at 0.6619, which is ahead of the 200-SMA at 0.6680 and before 0.6728.

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