AUD/USD Price Forecast: Bulls turn cautious amid modest USD strength, ahead of US data

• AUD/USD continues to draw support from the optimism over China’s stimulus measures.
• The upbeat Australian Retail Sales data provides an additional boost to the currency pair.
• Some follow-through USD buying caps gains for the major ahead of the US macro data.

The AUD/USD pair attracts buyers for the fourth straight day on Tuesday and climbs back closer to its highest level since February 2023 touched the previous day. The Australian Dollar (AUD) gets a minor lift following the release of upbeat domestic Retail Sales figures, which rose 0.7% in August as compared to a modest 0.1% increase in the previous month. This comes on top of the Reserve Bank of Australia's (RBA) hawkish stance, reiterating that interest rate cuts were unlikely in the near term. Apart from this, the recent stimulus bonanza from China turns out to be another factor that benefits the Aussie, though some follow-through US Dollar (USD) buying keeps a lid on the currency pair. 

The Federal Reserve (Fed) Chair Jerome Powell adopted a more hawkish tone on Monday and said that he sees only two more 25 basis point interest rate cuts this year as a baseline if the economy performs as expected. This, in turn, forced investors to pare their bets for a more aggressive policy easing by the Fed. Apart from this, the risk of a further escalation of geopolitical tensions in the Middle East assists the USD to gain positive traction for the second successive day and might cap gains for the AUD/USD pair. In fact, Israeli forces began limited, localized, and targeted ground raids in Lebanon two days after they killed the head of the armed group Hezbollah Hassan Nasrallah in an airstrike.

Meanwhile, the markets are still pricing in the possibility of an oversized Fed rate cut move by the end of this year. Furthermore, the global flight to safety triggers a fresh leg down in the US Treasury bond yields. This might hold back the USD bulls from placing aggressive bets and supports prospects for a further near-term appreciating move for the AUD/USD pair. Investors, however, might prefer to wait for this week's key US macro releases scheduled at the beginning of a new month, including the Nonfarm Payrolls (NFP) report on Friday. In the meantime, Tuesday's economic docket – featuring the ISM Manufacturing PMI and JOLTS Job Openings – might produce short-term opportunities. 

Technical Outlook

From a technical perspective, the 19-month peak, around the 0.6935-0.6940 region, now seems to have emerged as an immediate hurdle, above which the AUD/USD pair could aim to reclaim the 0.7000 psychological mark. Some follow-through buying should pave the way for a further near-erm appreciating move towards the 0.7055 intermediate hurdle en route to the 0.7100 round figure and the 2023 swing high, around the 0.7150-0.7160 region. 

On the flip side, any weakness below the 0.6900-0.6890 immediate support might still be seen as a buying opportunity near the 0.6835 region. This, in turn, should help limit the downside for the AUD/USD pair near the 0.6800 mark. The latter should act as a key pivotal point, which if broken decisively might prompt aggressive technical selling and drag spot prices to the 0.6760 intermediate support en route to the 0.6720 zone and the 0.6700 round figure.

AUD/USD daily chart