AUD/USD Price Forecast: Further weakness likely below 0.6350

AUD/USD dropped to multi-day troughs below the 0.6400 support.
The US Dollar picked up extra pace following positive US-China trade talks.
Focus shifts to the release of US inflation data on Tuesday.

Pablo Piovano FXStreet

The Australian Dollar (AUD) slipped further on Monday, extending the monthly correction against the US Dollar (USD).

In fact, AUD/USD deepened its recent breakdown of the critical 200-day simple moving average, extending the drop to multi-day lows near 0.6360 in response to the intense buying pressure surrounding the Greenback.

AUD/USD began the week on the back foot, weighed down by broad US Dollar strength, even as sentiment improved following constructive US-China trade talks held over the weekend in Switzerland.

While the Greenback’s gains pressured the pair, progress on the trade front could ultimately benefit the Australian Dollar, given Australia’s strong economic ties to China.

On the policy front, the People’s Bank of China (PBoC) recently introduced targeted easing measures in response to softening domestic data, including a cut to the 7-day reverse repo rate and a reduction in the reserve requirement ratio (RRR). Additional efforts included increased lending quotas and rate cuts aimed at specific sectors.

Latest data in China showed the Inflation Rate up 0.1% MoM in April, while dropping 0.1% over the last twelve months.

Diverging rate paths under scrutiny

Monetary policy divergence has also shaped recent AUD/USD moves. While both the Federal Reserve (Fed) and Reserve Bank of Australia (RBA) held rates steady, their guidance diverged.

Fed Chair Jerome Powell maintained a hawkish tone, reiterating a “wait-and-see” stance after the Fed’s decision. In contrast, RBA Governor Michele Bullock pointed to persistent inflation and labour market tightness as justification for holding the cash rate at 4.10%.

Though markets still price in a potential 25 basis point cut at the RBA’s 20 May meeting, expectations for deeper easing have moderated, with forecasts now pointing to up to 125 basis points in reductions over the coming year.

Positioning signals tentative optimism

Latest data from the CFTC showed net short positions on the AUD falling to an eight-week low of around 48.3K contracts as of May 6. A slight decline in open interest suggests sentiment may be stabilising.

Technical picture: Mixed signals

Technically, a clear break above the 200-day simple moving average (SMA) would likely tilt the AUD/USD outlook more constructively.

Resistance levels loom at the 2025 high of 0.6514 (May 7), followed by the November 2024 peak of 0.6687.

On the downside, interim support is seen at the 55-day and 100-day SMAs—currently at 0.6314 and 0.6288, respectively. A breach of these levels could expose the 2025 bottom at 0.5913 and possibly the pandemic-era trough near 0.5506.

Momentum indicators are showing early signs of fading strength, with the Relative Strength Index (RSI) easing to 49 and the Average Directional Index (ADX) receding toward 21.

AUD/USD daily chart

Outlook: Cautiously constructive

While technical and positioning signals looking mixed, the broader outlook for the AUD remains constrained. In addition, sticky domestic inflation, dependence on Chinese demand, and hopes on the trade front are expected to keep the price action volatile for the time being.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD flatlines near 0.6965 as less hawkish RBA counters USD weakness

AUD/USD holds steady above a two-week low, trading near 0.6965 in the Asian session on Wednesday as early midterm election results heighten political uncertainty and weigh heavily on the US Dollar. Moreover, reviving safe-haven demand triggers a fresh leg down in US bond yields, offsetting Fed hike bets and exerting additional pressure on the buck. However, a less hawkish RBA caps the Aussie.

USD/JPY declines below 158.00 as USD weakens on midterm election results

USD/JPY comes under heavy selling pressure on Wednesday, dropping below 158.00 during the Asian session as the US Dollar slumps to a one-month low amid heightened political uncertainty after early US midterm vote counts. Moreover, the prospect of gridlock in Washington drives safe-haven flows, triggering a fresh leg down in US bond yields and further weighing on the buck.

Gold continues scaling new weekly highs; eyes $4,050 as US sticks to elections-led losses

Gold builds on its strong intraday move up, hitting a series of new weekly tops, and climbing back close to the $4,050 level during the first half of the European session amid a broadly weaker US Dollar. Democrats’ wins in the House and Senate raise the prospect of gridlock in Washington. Moreover, heightened political uncertainty drove investors to safe-haven assets, exerting some downward pressure on US bond yields. This is seen weighing on the Greenback and supporting the precious metal.

Crypto Today: Bitcoin, Ethereum, XRP extend advance as US Dollar slides on Democrats' US midterm victory

Bitcoin trades above $78,000 on Wednesday as risk-on sentiment improves in the broader cryptocurrency market. Ethereum mirrors BTC’s recovery outlook, hovering above $2,300. Ripple similarly exchanges hands above $1.28, marking two consecutive days of gains.

ADP Employment Report expected to show slower job growth in October

The Automatic Data Processing Research Institute is due to release October’s private-sector employment report on Wednesday. The market consensus anticipates a moderate slowdown in job creation, with the ADP Employment Change expected to show 69K new private jobs in October, down from 90K in September.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.