AUD/USD Price Forecast: Remains below 200-day SMA despite hawkish RBA, ahead of US election

The AUD/USD pair catches fresh bids after data released earlier this Tuesday showed that business activity in China's services sector expanded at the fastest pace in three months in October. In fact, the Caixin/S&P Global Services PMI rose from 50.3 to 52.0 in October and the Composite PMI also increased to 51.9, or its highest level in four months. This was consistent with the official PMIs published last week and could be seen as an initial sign that China's big stimulus push, to bring growth back on track, is helping improve business conditions. Apart from this, the Reserve Bank of Australia's (RBA) hawkish stance provides a goodish lift to the Australian Dollar (AUD).

As was widely anticipated, the RBA decided to keep its cash rate unchanged for the eighth meeting in a row, at 4.35% and said the monetary policy needs to remain restrictive until inflation has assuredly approached its targets. In the accompanying policy statement, the RBA maintained its wording that it had not eliminated the chance of another interest rate rise if it was needed to bring inflation down. Furthermore, RBA Governor Michele Bullock said during the post-meeting press conference that there are still risks on the upside for inflation, fueling speculations that the central bank may not cut interest rates until April or May 2025 and offering additional support to the AUD.

The US Dollar (USD), on the other hand, struggles to capitalize on the overnight rebound from a two-week low amid a further decline in the US Treasury bond yields. Friday's mixed US jobs report for October, showing that Nonfarm Payrolls registered the smallest gain since December 2020, pointed to signs of a cooling labor market. This, in turn, reaffirmed bets for a 25 basis points interest rate cut by the Federal Reserve (Fed) later this week. Furthermore, the odds of the Republican nominee Donald Trump winning the 2024 US presidential election have deteriorated noticeably, which prompts some unwinding of the "Trump Trade" and continues to drag the US bond yields lower.

This turns out to be another factor that contributes to the bid tone surrounding the AUD/USD pair. Spot prices, however, remain below a technically significant 200-day Simple Moving Average (SMA) as traders seem reluctant to place aggressive bets and opt to wait on the sidelines ahead of the US presidential election. Furthermore, the Federal Open Market Committee (FOMC) meeting later this week will play a key role in influencing the near-term USD price dynamics and help in determining the next leg of a directional move for the currency pair.

Technical Outlook

From a technical perspective, a sustained strength beyond the 200-day SMA, currently pegged around the 0.6630 region, could trigger a short-covering rally and lift the AUD/USD pair to the 0.6675 intermediate hurdle en route to the 0.6700 mark. This is followed by the 50-day SMA, around the 0.6725-0.6730 area, which if cleared decisively might shift the near-term bias in favor of bullish traders and pave the way for additional gains.

On the flip side, the Asian session low, around the 0.6580-0.6575 zone could offer some support ahead of the 0.6540-0.6535 area, or the lowest level since August 8 touched last week. Some follow-through selling will expose the 0.6500 psychological mark, below which the AUD/USD pair could accelerate the depreciating move towards the 0.6440-0.6435 support zone. Spot prices could eventually drop to the 0.6400 round figure and the next relevant support near the 0.6370 region.

AUD/USD daily chart