AUD/USD Price Forecast: Outlook remains bearish so far

The US Dollar (USD) continued to face selling pressure on Thursday, extending its losses from the previous day and breaking below the significant 106.00 support level, as reflected in the Dollar Index (DXY).

Meanwhile, the Australian Dollar (AUD) grabbed some fresh breathing room and traded with humble hains near the 0.6450, where some initial resistance seems to have emerged.

Why the Aussie is struggling

The Australian Dollar's recent sharp decline was primarily driven by weaker-than-expected GDP data for the July-September period published on Wednesday. The economy expanded by just 0.3% quarter-on-quarter and 0.8% year-on-year—both falling short of earlier forecasts.

Adding to the downward pressure, key Australian exports like copper and iron ore prices remained well under pressure on the back of ongoing concerns about China’s economy. The Chinese Yuan, too, remained under pressure, weighed down by weak domestic data and renewed tariff threats from the US. As Australia’s economy is closely tied to China’s fortunes, uncertainty lingers over whether Beijing's stimulus measures will stabilize its slowing economy.

The RBA’s cautious approach

Earlier in November, the Reserve Bank of Australia (RBA) opted to keep interest rates steady at 4.35%, maintaining a cautious stance. While tackling inflation remains its top priority, the central bank is wary of exacerbating the country’s economic slowdown. RBA Governor Michele Bullock has emphasized the importance of keeping monetary policy tight until inflation shows sustained signs of easing.

October’s CPI data showed inflation holding steady at 2.1%, but the RBA has warned against making long-term assumptions based on one data point. For now, the central bank appears in no rush to cut rates, with any potential easing unlikely before the second quarter of 2025.

What lies ahead for AUD/USD

The Australian Dollar faces a challenging mix of risks and potential tailwinds. A shift by the US Federal Reserve (Fed) toward rate cuts could provide support for the Aussie, but persistent US inflation and the resilience of the US Dollar remain obstacles. Additionally, China’s economic slowdown continues to weigh heavily on Australia’s outlook, though there are some bright spots: the labour market remains robust, with unemployment steady at 4.1% and 16,000 jobs added in October.

AUD/USD daily chart

Technical outlook for AUD/USD

On the technical front, AUD/USD faces immediate resistance at 0.6549, last seen in late November. Further upside targets include the 200-day Simple Moving Average (SMA) at 0.6625 and November’s high of 0.6687.

On the downside, key support lies at 0.6399, the December low so far, followed by 0.6347, the year’s low from August. These levels could act as safety nets if bearish sentiment deepens.

Momentum indicators paint a cautious picture. The Relative Strength Index (RSI) has rebounded to 41, signaling weakening momentum, while the Average Directional Index (ADX) near 21 suggests a lack of strong trend direction.

Key data to watch

Next on tap Down Under will be the release of Australian Home Loans on Friday.

Bottom line

AUD/USD remains under pressure from a combination of global and domestic headwinds, leaving sentiment fragile. While there’s potential for recovery, much depends on upcoming economic data and developments in the US and China. For now, caution is likely to dominate market sentiment.