AUD/USD Price Forecast: The weaker Dollar and China give a hand

The US Dollar (USD) kept its corrective mood in place at the beginning of the week, with the US Dollar Index (DXY) retreating further from its recent 2024 highs, breaking past the 107.00 mark.

The Australian Dollar (AUD), on the other hand, added to gains witnessed on Friday, reclaiming the 0.6500 hurdle and beyond, and maintaining its main target on the critical 200-day SMA near 0.6630 in the short-term horizon.

Movements in the Aussie Dollar were also influenced by a rebound in copper and iron ore prices, offering some relief from recent declines. Meanwhile, investors appeared a tad less pessimistic regarding the effectiveness of the recent economic stimulus efforts in China.

Domestically, the Reserve Bank of Australia (RBA) left interest rates unchanged at 4.35% during its November 5 meeting, as widely expected. The central bank acknowledged progress towards its inflation goal but tempered its growth outlook. RBA Governor Michele Bullock hinted that the current rate setting remains suitable, though traders are starting to price in a potential rate cut by May 2025.

Later, in a separate panel discussion, Bullock reiterated that the RBA plans to keep monetary policy tight until it’s clear that inflation is on a steady downward path.

Australia’s latest inflation figures showed signs of cooling, with September’s Consumer Price Index (CPI) dropping to 2.1% and the annual rate for Q3 easing to 2.8%. While a possible rate cut by the Federal Reserve could provide a boost to AUD/USD, persistent inflation risks—particularly under a potential Trump administration—may keep the US Dollar strong, limiting any significant upside for the Aussie.

Ongoing concerns about China’s economic outlook could also weigh on the AUD.

On the economic data front, Australia’s latest labour market report showed the Unemployment Rate holding steady at 4.1% in October, with a modest increase in employment of 15.9K, all bolstering the view of quite a solid labour market.

Later in the week, attention will be on the RBA’s release of the Minutes of its November 5 gathering.

Early on Monday, RBA Assistant Governor Ken concluded that there is no indication that monetary policy in Australia is more robust than in other advanced economies. He also commented on the RBA's use of forward guidance, suggesting that it might be beneficial to periodically review the bank's approach in this area.

On the positioning front, speculators (non-commercial players) remained net buyers of AUD for the seventh consecutive week, although open interest maintained its downtrend well in place.

Technical Outlook for AUD/USD

In the immediate term, assuming sellers maintain control, the next support level is the November low of 0.6440 (November 14), followed by the 2024 bottom of 0.6347 (August 5).

On the upside, initial resistance is at the 200-day SMA of 0.6628, before reaching the November high of 0.6687 (November 7), which is still supported by the 100-day SMA.

The four-hour chart shows some consolidation in the lower end of the recent range. Initial support occurs at 0.6440, followed by 0.6347. On the other hand, resistance may arise at the 55-SMA (0.6546) and 100-SMA (0.6563). The RSI jumped past 54.