AUD/USD Price Forecast: Extends the range play amid mixed fundamental cues

The AUD/USD pair attracts fresh sellers near the 0.6500 psychological mark, or the top boundary of a multi-week-old trading range, and reverses a major part of the previous day's move higher. The intraday downfall drags spot prices back closer to the mid-0.6400s during the first half of the European session and is sponsored by a combination of factors. The Australian Dollar (AUD) weakens in reaction to dovish signals from the Reserve Bank of Australia (RBA) and disappointing Chinese data. Apart from this, a modest US Dollar (USD) recovery from a multi-week low exerts additional pressure on the currency pair.

Minutes of the last RBA meeting revealed that the board had considered an outsized 50 basis point (bps) rate cut last month. The central bank, however, decided that such a move was not yet warranted because there were no immediate signs the economy had been significantly affected by the US trade tariffs. Moreover, policymakers presented a dovish outlook on the Australian economy and showed readiness to respond decisively to any deterioration in the global economy. Adding to this, RBA Assistant Governor Sarah Hunter warned that higher US tariffs will put a drag on the global economy and the uncertainty could dampen investment, output, and employment in Australia. This, in turn, reaffirms bets for another interest rate cut by the RBA in July.

Meanwhile, a private survey showed that China’s manufacturing activity shrank in May amid a fall in new overseas orders for the second consecutive month. In fact, the Caixin/S&P Global Manufacturing PMI dropped sharply from 50.4 in April, to 48.3 last month, or its lowest level since September 2022. This comes on top of renewed US-China trade tensions, which turn out to be another factor driving flows away from the China-proxy Aussie. US President Donald Trump lashed out at China over the weekend and accused the latter of violating a preliminary tariff agreement. China, on the other hand, had criticized tighter US controls on its chip industry over the past few weeks, reviving fears of a trade war between the world's two largest economies.

The USD, on the other hand, gains some positive traction and reverses a part of the previous day's slide to its lowest level since April 22. This further contributes to the offered tone surrounding the AUD/USD pair. Any meaningful USD appreciation, however, still seems elusive in the wake of the growing acceptance that the Federal Reserve (Fed) will lower borrowing costs further amid signs of easing inflationary pressures in the US. Apart from this, concerns about the worsening US fiscal condition might hold back the USD bulls from placing aggressive bets and help limit losses for the currency pair. Traders now look forward to the release of the US JOLTS Job Openings data for some impetus later during the North American session.

Moreover, speeches from a slew of influential FOMC members will drive the USD demand and produce short-term trading opportunities. The focus will then turn to the quarterly Australian GDP print on Wednesday and other important US macro releases scheduled at the start of a new month, including the closely-watched Nonfarm Payrolls (NFP) report on Friday. In the meantime, the aforementioned mixed fundamental backdrop suggests that the AUD/USD pair could extend its range-bound price action, making it prudent to wait for a sustained move in either direction before positioning for the near-term trajectory.

AUD/USD 4-hour chart

Technical Outlook

The recent range-bound price action witnessed over the past four weeks or so points to indecision among traders over the next leg of a directional move. However, slightly positive oscillators on the daily chart support prospects for an eventual breakout to the upside, though the recent repeated failures near the 0.6500 psychological mark warrant caution for bulls. Hence, it will be prudent to wait for a sustained move and acceptance above the said handle before positioning for a move towards the year-to-date peak, around the 0.6535-0.6540 zone touched in May. The subsequent move up could extend further towards the 0.6600 mark en route to the the 0.6640 hurdle.

On the flip side, any further decline might continue to attract some dip-buyers near the 0.6400 mark. This should help limit the downside for the AUD/USD pair near the 0.6365-0.6360 area, or the lower end of the short-term trading range. A convincing break below the latter will be seen as a fresh trigger for bearish traders and make the AUD/USD pair vulnerable to accelerate the fall towards the 100-day Simple Moving Average (SMA), around the 0.6330-0.6325 area. Spot prices could eventually drop to the 0.6300 round figure, the 0.6245 intermediate support, and then aim to test sub-0.6200 levels.