AUD/USD Price Forecast: Further losses could revisit 0.6400

The US Dollar (USD) reversed Monday’s losses and printed decent gains on Tuesday, regaining the upper end of the range following President-elect Donald Trump’s announcements of the implementation of US tariffs on imports from Mexico, China, Europe and Canada.

Against that, the Australian Dollar (AUD) struggled to find its footing despite Monday’s firm rebound. Indeed, it accelerated its losses, sliding well south of the key 0.6500 support level to print new three-month lows.

Adding to the pressure, key Australian exports like copper and iron ore remained unable to find some fresh upside impulse, still reflecting ongoing doubts about the effectiveness of China’s economic stimulus measures and their implications for Australian trade.

Meanwhile, the Reserve Bank of Australia (RBA) continues to strike a cautious tone. Earlier this month, it held interest rates steady at 4.35%, reaffirming its commitment to taming inflation while acknowledging the challenges posed by slowing economic growth. Governor Michele Bullock reiterated that tight monetary policy would remain in place until inflation shows consistent and sustainable improvement.

In light of the upcoming release of the RBA’s Monthly CPI Indicator on Wednesday, it is worth recalling that the Australian Consumer Price Index (CPI) for September dipped to 2.1%, and annual inflation for the third quarter eased to 2.8%. However, the RBA has made it clear that one good quarter isn’t enough to justify a rate cut.

Looking ahead, AUD/USD could gain support if the Federal Reserve (Fed) pivots toward cutting rates. However, risks remain, including the potential for inflationary pressures from US policy changes and the USD’s lingering strength.

In addition, China’s economic slowdown continues to cast a shadow over the AUD’s prospects, despite resilience in Australia’s labour market. October’s unemployment rate held steady at 4.1%, with 16K jobs added, providing some comfort for the domestic economy.

As for the RBA’s policy outlook, markets anticipate a cautious approach. A potential quarter-point rate cut is pencilled in for Q2 2025, contingent on sustained progress in controlling inflation. The central bank has emphasized the need for more consistent improvement before easing policy.

On the trading side, speculators have shown renewed interest in the AUD. The latest CFTC data revealed that non-commercial traders increased their net long positions to a six-week high of 31.5K contracts as of November 19, alongside a modest rise in open interest.

Other than the RBA’s inflation gauge, attention also shift to data on Private Capital Expenditures and a speech by Governor Michele Bullock.

AUD/USD daily chart

Technical Outlook for AUD/USD

In the medium term, if bulls regain control, the next resistance level will be the weekly high of 0.6549 (November 25), seconded by the key 200-day SMA at 0.6627, followed by the November top of 0.6687 (November 7).

On the other side, the initial support comes from the November low of 0.6433 (November 26), which comes before the 2024 bottom of 0.6347 (August 5).

The four-hour chart shows a resurgence of the downside bias. The initial support is 0.6433, which precedes 0.6347. The initial resistance level, in the meantime, is expected to be 0.6549, ahead of the 200-SMA at 0.6594. The RSI eased below 39.