AUD/USD Price Forecast: Further decline targets the 0.6630 region

AUD/USD kept its bearish tone unchanged on Tuesday, retreating for the fourth session in a row on the back of the lacklustre advance in the US Dollar (USD), dovish RBA Minutes, and lack of fresh news from the recently announced stimulus measures in China.

Against that, the pair approached the key support around 0.6700, a region where the interim 55-day and 100-day SMAs also converge.

The Australian Dollar’s decline followed an inconclusive trend among other risk-sensitive currencies, despite a lack of clear movement in the Greenback. This came as traders continued to assess the Fed’s rate path as well as persistent geopolitical tensions in the Middle East.

Further weighing on the AUD were falling copper prices and iron ore prices on the back of lingering doubts about China’s recent stimulus measures, particularly those aimed at boosting the housing sector.

On the monetary side, the Reserve Bank of Australia (RBA) kept its cash rate steady at 4.35% at its September meeting. While acknowledging inflation risks, Governor Michele Bullock noted that a rate hike was not seriously considered.

On Tuesday, the RBA published its Minutes, suggesting a dovish shift as the bank removed the guidance from the August meeting that stated it was unlikely the cash rate target would be reduced in the short term.

Despite this, RBA Deputy Governor Andrew Hauser later dismissed the "dovish" characterization of the September Minutes, emphasizing that the bank's work to reduce inflation was "not done yet."

Currently, markets are pricing in a 55% chance of a 25 basis point rate cut by year-end, with the RBA expected to be among the last G10 central banks to lower rates, likely responding to sluggish economic activity and easing inflation pressures.

While Federal Reserve rate cuts are already priced in, spot could see additional gains in 2024. However, uncertainty remains over China’s economic outlook and how effectively its stimulus efforts will be implemented.

On the positioning front, the latest CFTC report showed speculators held net long positions in the AUD for the first time since July as of the week ending October 1. This came alongside a notable increase in open interest, with AUD/USD reclaiming the area above 0.6900 for the first time since February 2023 during this period.

AUD/USD daily chart

AUD/USD short-term technical outlook

Extra losses may push AUD/USD to retest the intermediate 55-day and 100-day SMAs of 0.6705 and 0.6688, respectively, ahead of the September low of 0.6622 (September 11), which is still supported by the crucial 200-day SMA (0.6626).

On the plus side, the first barrier appears at the 2024 high of 0.6942 (September 30), before the important 0.7000 milestone.

The four-hour chart shows an increase in the downward trend. Having stated that, the initial support is 0.6714, followed by 0.6622. On the upside, the 200-SMA at 0.6781 stands in front of 0.6809 and the 100-SMA at 0.6831. The RSI fell to about 29.