AUD/USD Forecast: Under pressure as Dollar gains momentum
AUD/USD Current Price: 0.63344
- The US Dollar strengthens ahead of the FOMC meeting and jobs data.
- Chinese data does not contribute to market sentiment.
- The AUD/USD pair moves sideways around the 20-day SMA.
The US Dollar strengthened ahead of key events and economic reports, pushing the AUD/USD pair below 0.6350. The pair continues to consolidate within a wide range, with the risk tilted to the downside.
Data released on Tuesday showed that China's official PMI for the manufacturing sector dropped to 49.5 in October from 50.2 in September, falling below the market consensus of 50.2. The Service PMI declined to 50.6 from 51.7, below the expected 51.8. These numbers indicate fresh signs of slowing activity and have not helped market sentiment, contributing to a deterioration in the economic outlook.
In Australia, Private Sector Credit rose by 0.2% in September, with the annual rate increasing 4.9%, slightly below the 5.1% of the previous month. On Wednesday, the AiG (Australian Industry Group) and the Jubo Bank PMIs (Purchasing Managers' Index) are due, along with Building Permits data. However, the focus will primarily be on US data and the FOMC meeting.
During the American session on Tuesday, the AUD/USD weakened due to a strong US Dollar. Despite declining consumer confidence, the Greenback gained momentum. The Employment Cost Index rose by 1.1% during the three months ending in September, surpassing the expected 1% increase. The ADP Private Employment report and the ISM Manufacturing PMI are due on Wednesday, followed by Jobless Claims on Thursday and Nonfarm Payrolls on Friday.
The key event ahead is the Federal Reserve's decision. No change in interest rates is expected. Despite the upbeat data, the market does not consider it sufficient for the Fed to take further action. As inflation slows and US Treasury yields remain high, the market is doing part of the Fed's work. No surprises are anticipated, and the Fed should maintain a tightening bias, suggesting that rates will remain higher for an extended period of time. The impact is uncertain and could either boost the Dollar, trigger a more significant correction, or favor the current consolidation.
AUD/USD short-term technical outlook
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On the daily chart, the AUD/USD has been moving within a wide range between 0.6280 and 0.6400, with the range centered around the 20-day Simple Moving Average (SMA). The upside is limited by the 55-SMA at 0.6398. A break above 0.6400 would strengthen the outlook for the Australian Dollar, while a move below 0.6280 suggests further weakness.
On the 4-hour chart, technical indicators point to the downside. The Relative Strength Index (RSI) and Momentum are trending lower, and the Moving Average Convergence Divergence (MACD) is showing bearish signals. The price is below the 20-period SMA, which adds to the negative outlook ahead of the Asian session. If consolidation continues below 0.6330, it could open the door for a decline towards 0.6300, which is the last defense before the crucial support at 0.6280. On the upside, a move above 0.6350 would alleviate the bearish pressure. A break above 0.6380 could propel the pair towards 0.6400 and potentially higher.
Support levels: 0.6300 0.6280 0.6255
Resistance levels: 0.6380 0.6400 0.6440
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
