AUD/USD Price Forecast: Bears take charge as China's stimulus update disappoints investors

The AUD/USD pair extends its downtrend for the fourth successive day – also marking the fifth day of a negative move in the previous six – and drops to over a three-week low on Tuesday. The Australian Dollar (AUD) started losing ground after China's National Development and Reform Commission – stated that the economy is facing more complex internal and external environments. The state planner also fell short of announcing any new major stimulus plans, underwhelming investors. This, along with a generally weaker tone around the equity markets, turn out to be key factors exerting pressure on the risk-sensitive Aussie. 

The AUD bulls seem unimpressed by the Reserve Bank of Australia's (RBA) September meeting minutes, which revealed that the board discussed scenarios for lowering and raising interest rates in the future. Furthermore, board members felt not enough had changed from previous meetings, and that the current cash rate best-balanced risks to inflation and the labor market. The US Dollar (USD), on the other hand, remains on the defensive below a seven-week high touched last Friday. This, in turn, assists the AUD/USD pair to find some support ahead of the 0.6700 round-figure mark and defend the 50-day Simple Moving Average (SMA).

Meanwhile, investors have been scaling back their bets for another oversized interest rate cut by the Federal Reserve (Fed) in November in the wake of the upbeat US jobs report released on Friday, which pointed to a still resilient labor market. The not-so-dovish expectations allow the yield on the benchmark 10-year US government bond to hold above the 4.0% threshold and limit the USD losses. Apart from this, the risk of a further escalation of geopolitical tensions and a full-blown war in the Middle East should benefit the safe-haven buck. This, in turn, suggests that the path of least resistance for the AUD/USD pair remains to the downside. 

Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Tuesday, leaving the USD at the mercy of Fedspeak. The focus, however, will remain glued to the FOMC meeting minutes on Wednesday, followed by the US Consumer Price Index (CPI) and the Producer Price Index (PPI) on Thursday and Friday, respectively. This will play a key role in influencing the near-term USD price dynamics and help in determining the next leg of a directional move for the AUD/USD pair. 

Technical Outlook

From a technical perspective, any subsequent fall is likely to find some support near the 100-day SMA, currently pegged near the 0.6690-0.6685 region. The said area should now act as a key pivotal point, which if broken decisively will set the stage for an extension of the recent sharp pullback from the vicinity of mid-0.6900s, or the highest level since February 2023 touched last month. Given that oscillators on the daily chart have just started gaining negative traction, the AUD/USD pair might then turn vulnerable to challenge the very important 200-day SMA, around the 0.6625-0.6620 zone. The latter coincides with the September monthly swing low and is closely followed by the 0.6600 mark, below which spot prices could weaken further. 

On the flip side, the 0.6760-0.6770 region now seems to act as an immediate hurdle ahead of the 0.6800 round figure and the 0.6815-0.6820 supply zone. Some follow-through buying will suggest that the downtrend witnessed over the past week or so has run its course and shift the bias in favor of bullish traders. The subsequent short-covering move could lift the AUD/USD pair to the 0.6870-0.6875 intermediate hurdle en route to the 0.6900 mark and the year-to-date (YTD) peak, around the 0.6940-0.6945 region.

AUD/USD daily chart