AUD/USD Forecast: Recovery gathers further pace

The Aussie dollar found another excuse to extend the weekly bounce in the continuation of the downward bias in the greenback on Wednesday.

In fact, the US dollar gave away further gains after hitting a new yearly high north of the 104.00 barrier when tracked by the USD Index (DXY) earlier in the week, all amidst further investors’ repricing of a potential interest rate cut by the Federal Reserve (Fed) either in May or June.

Back to the domestic panorama, AUD remained underpinned pari passu with traders’ assessment of the latest interest rate decision by the Reserve Bank of Australia (RBA), which maintained interest rates unchanged at 4.35% amidst a hawkish message, leaving the door open to a potential interest rate hike in the future.

Continuing with the RBA, the Statement on Monetary Policy (SoMP) revealed a slight reduction in the bank’s inflation forecasts, expecting both metrics to stay below 3% by the fourth quarter of 2025. Furthermore, the RBA revised down its GDP growth projections for the foreseeable future, primarily reflecting a less optimistic outlook for consumer spending and housing investments in the near term.

Furthermore, Governor Bullock departed from the expected move towards a dovish stance and underscored the incomplete nature of addressing inflation, emphasizing that the current inflation rate is considered unacceptably high.

Also undermining the pair’s upside potential were the persistent downtrend in iron ore and the rapid resumption of the selling bias in copper prices.

AUD/USD daily chart

AUD/USD short-term technical outlook

Further losses in AUD/USD should clear its 2024 level of 0.6468 (February 5), to then embark on a potential test of the 2023 bottom of 0.6270. (October 26). The breach of the latter may prompt a move to the round level of 0.6200 to come on the horizon prior to the 2022 low of 0.6169 (October 13). On the upside, there is an immediate hurdle at the crucial 200-day SMA at 0.6572, which is ahead of the interim 55-day SMA at 0.6644. The breakout of this zone may lead the pair to target the December 2023 high of 0.6871 (December 28), followed by the July 2023 top of 0.6894 (July 14) and the June 2023 peak of 0.6899 (June 16), all just before of the important 0.7000 level.

The 4-hour chart indicates some early consolidation, paving the way for a dip to 0.6452 once 0.6468 is cleared. On the bullish side, 0.6610 is an immediate hurdle ahead of the 200-SMA at 0.6658. The surpassing of this zone indicates a possible progress to 0.6728. The MACD rebounds somewhat but remains well in the negative zone, and the RSI approaches the 50 threshold.

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