AUD/USD Forecast: RBA to the rescue?

The beginning of a new trading week saw relentless selling pressure on the Aussie dollar, pushing AUD/USD to the sub-0.6500 zone for the first time since mid-November.

Furthermore, the pair declined for the second consecutive session and entered its sixth consecutive week of losses influenced by marked gains in the Greenback as market participants continued to digest Friday’s US Nonfarm Payrolls (+353K jobs) and hawkish remarks from Chair Powell over the weekend.

Also weighing on Australian currency emerged the lack of positive surprise from the release of the Chinese Services and Composite PMIS tracked by Caixin and published during early trade.

In addition, the ongoing downward movement in spot convincingly breached the critical 200-day SMA (0.6573), indicating the potential for the bearish trend to persist, at least in the short term.

There was also no reaction in AUD after the China Securities Regulatory Commission restated its commitment on Sunday to encourage the inflow of medium- and long-term funds into the market. Additionally, they pledged to take strong measures against illegal activities, including malicious short selling and insider trading, all amidst another attempt to address the decline in Chinese stocks.

Back to the domestic scenario, the Reserve Bank of Australia's (RBA) seems to have the key to lend some near-term support to the Australian Dollar via a hawkish hold at its monetary policy meeting on February 6. However, consensus among investors remains firm and expects the central bank to keep its Official Cash Rate (OCR) unchanged at 4.35%.

The latter view is propped up by the latest inflation data from Australia, revealing increased disinflationary pressures at the end of the previous year. Both the Inflation Rate and the RBA's Monthly CPI Indicator rose by significantly less than the initial estimates, at 4.1% in Q4 and 3.4% in December, respectively.     

AUD/USD daily chart

AUD/USD short-term technical outlook

Further losses may cause the AUD/USD to retest its 2024 level of 0.6485 (February 5) ahead of the 2023 bottom of 0.6270 (October 26). The breach of the latter could prompt a test of the round level of 0.6200 to emerge on the horizon prior to the 2022 low of 0.6169 (October 13). On the positive side, there is a temporary resistance at the 55-day SMA of 0.6645. The breakout of this zone may motivate the pair to set sails for the December 2023 high of 0.6871 (December 28), before the July 2023 top of 0.6894 (July 14) and the June 2023 peak of 0.6899 (June 16), all just ahead of the key 0.7000 threshold.

The 4-hour chart suggests further weakness in the short-term, opening the door to a drop to 0.6452 sooner rather than later. On the bullish side, 0.6624 is an immediate barrier ahead of the 200-SMA at 0.6671. The trespass of this zone signals a potential advance to 0.6728. The MACD retreats further in the negative zone and the RSI flirts with 35.

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