AUD/USD Price Forecast: Bulls turn cautious ahead of Fed, despite optimism over trade talks

The AUD/USD pair touches a fresh year-to-date (YTD) top, around the 0.6515 area on Wednesday, following the announcement of US-China trade talks in Switzerland later this week. In fact, US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer are set to meet their Chinese counterparts to discuss trade and economic issues. This marks the first direct trade negotiations since the US imposed tariffs on China and a step toward resolving the tit-for-tat tariff war between the world's two largest economies, which boosts investors' confidence and the China-proxy Aussie.

Meanwhile, strong Australian consumer inflation figures released last week tempered expectations of an outsized interest rate cut by the Reserve Bank of Australia (RBA), which further underpins the Australian Dollar (AUD). The US Dollar (USD), on the other hand, struggles to attract any meaningful buyers amid the heightened economic uncertainty on the back of US President Donald Trump's rapidly shifting stance on trade policies. Trump said on Tuesday that he and top administration officials will review potential trade deals over the next two weeks to decide which ones to accept.

This, however, counters earlier statements from Bessent that the Trump administration could announce trade deals with some of the largest trade partners as early as this week. Furthermore, Trump had announced 100% tariffs on movies produced outside the US and also indicated that he plans to announce fresh tariffs on pharmaceutical imports over the next two weeks. This keeps a lid on the market optimism. Apart from this, a modest US Dollar (USD) uptick prompts some selling around the AUD/USD pair, which now seems to have to have snapped a three-day winning streak.

The USD bulls, however, seem reluctant to place aggressive bets and opt to wait for the outcome of a two-day FOMC meeting. The Federal Reserve (Fed) is scheduled to announce its decision later during the US session and is expected to hold interest rates steady. Hence, investors will closely scrutinize the accompanying policy statement and Fed Chair Jerome Powell's comments during the post-meeting press conference for cues about the future rate-cut path. This, in turn, will play a key role in influencing the USD price dynamics and provide some meaningful impetus to the AUD/USD pair.

AUD/USD daily chart

Technical Outlook

From a technical perspective, the recent breakout through a short-term trading range and a subsequent strength beyond the very important 200-day Simple Moving Average (SMA) was seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone. This, in turn, suggests that the path of least resistance for the AUD/USD pair remains to the upside and supports prospects for the emergence of dip-buying near the 0.6460 area, or the 200-day SMA. The said area near the trading range resistance breakpoint, below which spot prices could slide to the 0.6400 round figure en route to the 0.6360-0.6350 horizontal zone. The latter should act as a strong base, and a convincing break below might shift the near-term bias in favor of bearish traders.

On the flip side, the 0.6500 psychological mark, followed by the Asian session swing high, around the 0.6520-0.6525 region, now seems to act as immediate hurdles. Some follow-through buying will reaffirm the constructive outlook, which should allow the AUD/USD pair to surpass the 0.6565-0.6570 intermediate hurdle and reclaim the 0.6600 round figure. The upward trajectory could extend further towards the next relevant hurdle near the 0.6635-0.6640 zone en route to the November 2024 swing high, around the 0.6700 neighborhood.