AUD/USD Price Forecast: Further weakness could retest 0.6500… and below

The march north in the US Dollar stayed unabated on turnaround Tuesday, weighing heavily on the risk-related universe and pushing the US Dollar Index (DXY) to fresh four-month highs, just past the 106.00 barrier.

In contrast, the Australian Dollar (AUD) struggled, dropping weel below the 0.6600 mark and dipping beneath its key 200-day Simple Moving Average (SMA) of 0.6629. This shift has raised the possibility of further declines in the short term.

The Aussie also faced headwinds from falling copper prices, and iron ore prices amidst the widespread decline in commodity prices.

Adding to the downward pressure was disappointing data from China over the weekend, which showed consumer prices rising at the slowest pace in four months, signaling deepening deflationary pressures on the producer side. These figures have heightened concerns about China’s broader economic health, casting doubt on the effectiveness of its latest stimulus measures.

On the domestic front, the Reserve Bank of Australia (RBA) held interest rates steady at 4.35% during its November 5 meeting, aligning with market expectations and maintaining a neutral policy outlook. The RBA noted that inflation is gradually moving toward its 2-3% target but slightly lowered its growth forecast.

RBA Governor Michele Bullock’s balanced comments in the follow-up press conference suggested that current interest rate levels are appropriate for now. Traders are now eyeing a potential rate cut in May 2025, which could make the RBA one of the last central banks among G10 nations to consider easing.

Australia’s latest inflation data showed a cooling trend, with September’s Consumer Price Index (CPI) slowing to 2.1%, and the annual rate for Q3 coming in at 2.8%.

Looking ahead, while potential Federal Reserve (Fed) rate cuts might provide a boost to AUD/USD, inflationary pressures expected under a Trump administration could keep the US Dollar strong, limiting the upside for the pair. Meanwhile, ongoing concerns about China’s economic outlook are likely to keep the Aussie under scrutiny.

Lastly, speculators were net buyers of the Australian Dollar in the week leading up to November 5, according to the latest CFTC data. However, this occurred against the backdrop of a fourth straight drop in open interest, suggesting some caution in the market.

On the data front, Consumer Confidence in Australia improved to 94.6 in November, according to Westpac, while Business Confidence tracked by NAB also surprised to the upside, rising to 5 in October.

AUD/USD daily chart

AUD/USD short-term technical outlook

On the upside, the AUD/USD should face first resistance around the November top of 0.6687 (November 7), which is strengthened by the provisional 100-day SMA. Further up, the intermediate 55-day SMA at 0.6715 appears before hitting the 2024 high of 0.6942 (September 30).

If sellers seize control, the next point of contention is the November low of 0.6511 (November 6), which precedes the 2024 bottom of 0.6347 (August 5).

The four-hour chart reveals a quick return to the negative trend. That said, the initial support comes at 0.6528 seconded by 0.6511. On the upside, the immediate obstacle is the 55-SMA at 0.6590, prior to the 100-SMA 0.6606. The RSI dropped to about 34.