AUD/USD Forecast: Seems poised to climb further amid divergent RBA-Fed expectations

The AUD/USD pair prolongs a nearly two-week-old uptrend and climbs closer to the 0.6600 mark, or its highest level since late October, during the first half of the European session on Wednesday. The Australian Dollar (AUD) continues with its relative underperformance in the wake of hopes for more policy easing by the Reserve Bank of Australia (RBA), which offsets rather unimpressive Australian economic growth figures. Apart from this, the prevalent US Dollar (USD) selling bias turns out to be another factor acting as a tailwind for the currency pair.

The Australian Bureau of Statistics reported this Wednesday that the economy expanded 0.4% during the July-September period, down from the 0.6% rise seen in the second quarter and missing market expectations. Adding to this, the annual Gross Domestic Product growth rate also fell short of consensus estimates and stood at 2.1% compared to 1.8% in the previous quarter. The latter, however, marks the strongest expansion since the third quarter of 2023. Furthermore, RBA Governor Michele Bullock admitted before a parliamentary committee that inflation is not yet sustainably back within the central bank's 2% to 3% annual target band. In fact, Australia's headline Consumer Price Index (CPI) accelerated from the 3.5% YoY rate to 3.8% YoY in October. Moreover, the RBA Trimmed Mean CPI rose 3.3% during the reported month from 3.2% in September.

Bullock also warned that the central bank is looking very hard at recent inflation numbers, and if the price pressure turns out to be permanent, it would have implications for the future path of monetary policy. This further dampens hopes for a rate by the RBA next week. Moreover, traders are now pricing in a greater chance that the Australian central bank will hike interest rates next year. This marks a significant divergence in comparison to dovish US Federal Reserve (Fed) expectations. In fact, recent US macro data pointed to a gradual cooling of the US economy, which, along with comments from Fed officials, lifted bets for a 25-basis-point rate cut at the upcoming FOMC meeting next week. This, in turn, keeps the USD depressed near its lowest level since November 14, touched on Monday, and contributes to the AUD/USD pair's move higher.

Traders now look forward to Wednesday's US economic docket, featuring the ADP report on private-sector employment and ISM Services PMI. The focus, however, will remain glued to the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday, or the Fed's preferred inflation gauge. The crucial data will play a key role in influencing the Fed's future rate-cut path, which, in turn, will drive the USD demand and provide some meaningful impetus to the AUD/USD pair. Nevertheless, the divergent RBA-Fed policy expectations suggest that the path of least resistance for spot prices remains to the upside and backs the case for a further near-term appreciating move.

AUD/USD daily chart

Technical Analysis:

The 100-day Simple Moving Average (SMA) has edged slightly lower, while the AUD/USD pair holds above it, preserving a mild bullish tone. The SMA currently stands around the 0.6535 region, offering nearby dynamic support. The Moving Average Convergence Divergence (MACD) histogram prints in positive territory and is expanding, suggesting strengthening bullish momentum. The Relative Strength Index (RSI) at 60 signals firm buying pressure without overbought conditions.

The descending trend line extending the year-to-date, touched in September, was breached last week, easing topside constraints and aligning with the improving momentum backdrop. As long as the AUD/USD pair holds above the breakout and the 100-day SMA, dips would remain shallow, and the bias would stay higher. A close back below the broken line would undermine the advance and restore downside pressure.

(The technical analysis of this story was written with the help of an AI tool)