AUD/USD Price Forecast: Bulls await move beyond 100-day SMA amid a weaker USD

The AUD/USD pair builds on the previous day's late recovery from the 0.6440 region, or its lowest level since August 22, and gains some follow-through traction on Wednesday. The momentum lifts spot prices back above the 0.6500 psychological mark and is sponsored by a broadly weaker US Dollar (USD). The Australian Dollar (USD) draws additional support from the Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter's hawkish comments earlier today, saying that inflation is likely to be stronger than expected in the third quarter.

Hunter added that labor market and economic conditions might be tighter than assumed, while stating that the board will adjust policy as appropriate. Her remarks echoed Minutes from the September RBA meeting, which showed that policymakers saw no urgency to cut rates amid persistent inflation and steady employment. Traders now see even odds of a reduction in November and are pricing in a 60% chance of in December. The attention now shifts to RBA Governor Michele Bullock's speech and the Australian labor market report on Thursday.

Meanwhile, persistent deflationary pressures in China fueled hopes for further policy support, which further benefits the China-proxy Aussie. The National Bureau of Statistics (NBS) reported that China's headline Consumer Price Index (CPI) fell 0.3% year-on-year in September, compared to 0.2% expected and 0.4% in August. Meanwhile, the core gauge, excluding food and energy prices, climbed 1.0% from the year prior, marking the fastest pace since February 2024. Moreover, the decline in the Producer Price Index (PPI) moderated for the second straight month.

The data pointed to a tepid consumer demand amid escalating trade tensions with the US. In fact, US President Donald Trump said that his administration is considering terminating the cooking oil trade with China in response to the latter's refusal to purchase American soybeans. China announced new special port fees for US ships arriving in Chinese ports after enhancing restrictions on the export of rare earths. Meanwhile, Trump threatened last week to raise tariffs on Chinese goods to 100%, fueling concerns about a trade war between the world's two largest economies.

However, the prevalent USD selling bias helps offset the negative factor and remains supportive of the bid tone surrounding the AUD/USD pair through the early European session. US Federal Reserve Chair Jerome Powell did not provide specific guidance on interest rates on Tuesday, though comments about weakness in the labor market suggested that further easing is firmly on the table. Moreover, other Fed officials pointed to the likelihood of additional rate cuts going forward, which, in turn, drags the USD away from its highest level since early August, touched last week.

Apart from this, worries that a prolonged US government shutdown would affect the economic performance turned out to be another factor undermining the Greenback. The latest vote on the Republican-backed stopgap funding bill to end the partial federal government shutdown fell short of the votes needed for passage in the Senate on Tuesday. This means that the US shutdown, which started on October 1, will extend into a third week, with no resolution in sight, which, in turn, favors the USD bears and backs the case for a further appreciating move for the AUD/USD pair.

AUD/USD daily chart

Technical outlook

The AUD/USD pair found some support ahead of a technically significant 200-day Simple Moving Average (SMA) on Tuesday. However, negative oscillators on the daily chart make it prudent to wait for some follow-through buying beyond the 100-day SMA, currently pegged near the 0.6535 region, before positioning for any further gains. Spot prices might then aim to reclaim the 0.6600 mark and climb further towards the 0.6625-0.6630 supply zone. A sustained strength beyond the latter might shift the bias in favor of bullish traders and allow spot prices to retest the year-to-date high, or levels just above the 0.6700 mark touched in September.

On the flip side, weakness back below the 0.6480-0.6475 region might continue to attract some buyers ahead of the 200-day SMA support, currently around the 0.6425 region. A convincing break below will be seen as a fresh trigger for bearish traders and drag the AUD/USD pair below the 0.6400 round figure, towards the July swing low, around the 0.6375-0.6370 region, en route to the 0.6350 horizontal support. The downward trajectory could eventually make spot prices vulnerable to fall towards the 0.6300 round figure.