AUD/USD Price Forecast: Unclear outlook and gains capped around 0.6550

• AUD/USD alternated gains with losses just above the 0.6500 barrier.
• The US Dollar rose to new 2024 peaks when tracked by the US Dollar Index.
• Next on tap in Oz will be the flash Manufacturing and Services PMIs.

The US Dollar (USD) had a strong comeback on Thursday, regaining momentum on the back of persistent geopolitical concerns and mixed movements in US yields across the spectrum.

In the same line, the Australian Dollar (AUD) managed to regain the smile following Wednesday’s strong pullback, reclaiming the 0.6500 mark and beyond and refocusing on the recent weekly high around 0.6550. It is worth noting that Wednesday’s weakness in the Aussie Dollar (AUD) was initially fueled by a weaker Greenback and hawkish signals from the Reserve Bank of Australia’s (RBA) latest meeting Minutes.

Reinforcing the AUD’s uptick, rising prices for key Australian exports like copper and iron ore provided some extra optimism. However, traders remained cautious, keeping an eye on China’s economic stimulus measures and their potential impact on Australian exports.

The RBA’s decision earlier this month to keep interest rates steady at 4.35%, as expected, emphasized its focus on curbing inflation while expressing concerns about slower economic growth. Governor Michele Bullock reiterated the need for tight monetary policy until inflation shows a consistent and sustainable decline.

Recent inflation data from Australia offered encouraging signs. The Consumer Price Index (CPI) for September fell to 2.1%, with the annual Q3 inflation rate easing to 2.8%. However, the central bank has made it clear that a single quarter of favourable data isn’t enough to justify cutting rates just yet.

Looking ahead, AUD/USD could gain some support if the Fed opts for a rate cut. However, this optimism is tempered by lingering uncertainties, such as the potential inflationary risks of a Trump presidency and the continued resilience of the US Dollar.

China’s economic slowdown remains a significant headwind for the AUD, even as Australia’s domestic labour market holds steady. October’s unemployment rate remained at 4.1%, with around 16K jobs added—a positive signal for the local economy.

As for the RBA’s policy outlook, market expectations point to a cautious approach. A gradual quarter-point rate cut is now anticipated by Q2 2025, but only if inflation continues to decline steadily. The central bank has emphasised the need for sustained progress before shifting gears.

AUD/USD daily chart

Technical Outlook for AUD/USD

In the medium term, assuming bulls regain control, the next resistance level is the 200-day SMA at 0.6628, followed by the November high of 0.6687 (November 7), which remains supported by the interim 100-day SMA.

On the other side, the initial support comes from the November low of 0.6440 (November 14), which precedes the 2024 bottom of 0.6347 (August 5).

The four-hour chart shows a bumpy upside trend. The initial support is 0.6484, prior to 0.6440, and 0.6347. Initial resistance is expected at 0.6544, ahead of the 100-SMA at 0.6549 and the 200-SMA at 0.6615. The RSI hovered around 53.