CFD Trading Rate Australian Dollar vs US Dollar (AUDUSD)

• AUD/USD attracts some dip-buyers on Monday, though the uptick lacks bullish conviction.
• The technical setup warrants caution before positioning for any further appreciating move.
• Bearish traders need to wait for a break below the 50% Fibo. level before placing fresh bets.

The AUD/USD pair kicks off the new week on a positive note, snapping a two-day losing streak and stalling its recent pullback from the highest level since February 2023 touched last Monday. Spot prices currently trade just above the 0.6800 mark, up 0.20% for the day, though lack follow-through buying amid a bullish US Dollar (USD).

The upbeat US monthly employment details released on Friday eased concerns about an economic slowdown, which, along with the optimism over China's stimulus, remains supportive of the risk-on mood. Apart from this, the Reserve Bank of Australia's (RBA) hawkish stance benefits the risk-sensitive Aussie. Meanwhile, diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed) and escalating geopolitical tensions in the Middle East assist the safe-haven buck to stand tall near a seven-week high. This, in turn, acts as a headwind for the AUD/USD pair.

From a technical perspective, spot prices on Friday found support near the 0.6785 region, or the 50% Fibonacci retracement level of the September move-up. The subsequent move up favors bullish traders, though the fact that oscillators on the daily chart have just started gaining negative traction warrants some caution before positioning for any further appreciating move. In the meantime, the 0.6820 region, or the 38.2% Fibo. level is likely to act as an immediate hurdle, above which the AUD/USD pair could accelerate the positive move towards the 0.6865-0.6870 region.

The latter near the 23.6% Fibo. level breakpoint, which if cleared will suggest that the corrective slide has run its course and prompt fresh buying. Spot prices might then aim to reclaim the 0.6900 round-figure mark and extend the momentum further towards the 0.6940-0.6945 region, or the year-to-date (YTD) peak touched last week. 

On the flip side, bearish traders need to wait for a sustained break and acceptance below the 50% Fibo. level, around the 0.6785 region, before placing fresh bets. The AUD/USD pair might then slide to the 61.8 % Fibo. level, around the 0.6745 region, before eventually dropping en route to sub-0.6700 levels, or the 100-day Simple Moving Average (SMA).

AUD/USD daily chart

• AUD/USD trades in positive territory around 0.6805 in Monday’s early Asian session. 
• The US Nonfarm Payrolls came in stronger than expectations in September. 
• Middle East geopolitical risks might weigh on the Aussie, but a hawkish RBA could cap its downside. 

The AUD/USD pair recovers some lost ground to near 0.6805, snapping the two-day losing streak during the early Asian session on Monday. The stronger-than-expected US September employment data provide some support to Greenbank and drag the major pair lower. 

Data released by the Labor Department on Friday showed that the US Nonfarm Payrolls (NFP) rose by 254,000 in September from a revised 159,000 in August and was better than the 140,000 forecast. Meanwhile, the Unemployment Rate fell to 4.1% in September from 4.2% in the previous month. 

The upbeat US economic data has eased concerns about the weakness in the labor market and prompted traders to reduce bets that the US Federal Reserve (Fed) will cut the deeper interest rate, which provides some support to the US Dollar (USD). The markets are now pricing in nearly 97.4% chance of 50 basis points (bps) Fed rate cuts in September, up from 31.1% before the NFP data. 

The Australian Dollar (AUD) remains under selling pressure amid geopolitical tensions in the Middle East, which hurt the risk appetite for the AUD. However, the downside of the pair might be limited due to the hawkish stance of the Reserve Bank of Australia (RBA). Looking ahead, traders will take more cues from the RBA Meeting Minutes, which will be released on Tuesday. 

• AUD/USD remains restricted to 0.6850 amid caution ahead of the US NFP data for September.
• The US NFP data will significantly influence the Fed’s interest rate cut path.
• Investors await the RBA minutes to project the next move in the Australian Dollar.

The AUD/USD pair remains offered near the key resistance of 0.6850 in Friday’s European session. The Aussie asset would continue to face pressure as traders brace for the United States (US) Nonfarm Payrolls (NFP) data for September, which will be published at 12:30 GMT.

With growing conflicts in the Middle East region, market sentiment remains uncertain. Risk-perceived currencies are under pressure as rising Oil prices due to Israel-Iran war would result in a sharp increase in foreign outflows of those economies, which are highly dependent on imported Oil. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near 102.00.

The US NFP will be under the spotlight as it would force traders to adjust market expectations for Federal Reserve’s (Fed) monetary policy action in the remaining two meetings this year. Currently, financial markets are slightly confident about the Fed to reduce interest rates further by 75 basis points (bps).

Economists expect the addition of fresh payrolls at 140K, marginally lower than 142K in August. The Unemployment Rate is seen steady at 4.2%. Market participants will also focus on the Average Hourly Earnings data, a key measure to wage growth that drives consumer spending. The annual wage growth measure is estimated to have risen steadily by 3.8%, with monthly growth rate slowing to 0.3% from 0.4% in August.

In the Asia-Pacific region, the next trigger for the Australian Dollar (AUD) will be the Reserve Bank of Australia (RBA) Meeting Minutes of the September policy meeting. In the meeting, the RBA left interest rates unchanged at 4.35%, as expected. The RBA also signalled that there was no offer for a further hike on the table.

The Australian Dollar (AUD) could continue to weaken, but it does seem to have sufficient momentum to break clearly below 0.6820 for now. In the longer run, there has been a slight increase in momentum; the risk of AUD breaking below 0.6820 has also increased, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

The risk of AUD breaking below 0.6820 has increased

24-HOUR VIEW: “Our view of sideways trading yesterday was incorrect, as AUD fell to a low of 0.6830. Downward momentum has increased, albeit not significantly. Today, AUD could continue to weaken, but it does seem to have enough momentum to break clearly below the major support at 0.6820. On the upside, a breach of 0.6880 (minor resistance is at 0.6865) would mean that AUD is not weakening further.”

1-3 WEEKS VIEW: “Our most recent narrative was from Wednesday (02 Oct, spot at 0.6880), wherein AUD ‘has likely entered a range trading phase, and it is expected to trade between 0.6820 and 0.6935 for the time being.’ Yesterday, AUD dropped to a low of 0.6830. There has been a slight increase in downward momentum, and the risk of AUD breaking below 0.6820 has also increased. To maintain the current tentative buildup in momentum, AUD must remain below 0.6905 in the next few days. Looking ahead, below 0.6820, there is another major support nearby at 0.6795.”

• AUD/USD stalls at upside resistance and reverses lower, falling back inside its range. 
• It is threatening a short-term trend reversal and MACD is about to cross below its signal line. 

AUD/USD reverses and starts falling after what appears to be a false breakout above the top of the range. 

AUD/USD Daily Chart 

The Aussie pair has now started falling back inside the range. It is possible this could be the start of a new short-term downtrend that might take AUD/USD back down towards the range lows in the 0.63s, however, it is still too early to say with any confidence.  

The blue Moving Average Convergence Divergence (MACD) line is threatening to cross below the red signal line and if it does that would add further evidence to the argument that AUD/USD is reversing trend. 

AUD/USD may have formed a Measured Move pattern during August and September as it rose from the bottom to the top of the range. Such patterns resemble zig-zags and lengths of waves A and C are similar or related by Fibonacci.  

The Aussie pair reached an initial upside target based on extrapolating wave A of the Measured Move higher by a 61.8% Fibonacci. This target lies at around 0.6115. This is further evidence the uptrend may have reached its zenith and a new downtrend is currently forming. For more confirmation price would have to break below the 0.6785 level (September 20 swing low). Such a move would be expected to reach an initial downside target of 0.6709, the level of the 50-day Simple Moving Average (SMA). 

Until then, there is still a risk the move down could stall and the uptrend resume, taking AUD/USD higher again. A break above the 0.6942 September 30 peak would confirm a resumption of the uptrend and target 0.6988 (14 February ‘23 swing high), followed by 0.7156 in a bullish case (2 February ‘23 high).

The Australian Dollar (AUD) is expected to edge lower to 0.6850; the major support at 0.6820 is unlikely to come under threat. AUD has likely entered a range trading phase, expected to be between 0.6820 and 0.6935, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD has likely entered a range trading phase

24-HOUR VIEW: “After AUD rose to 0.6944 two days ago, we indicated yesterday that ‘there has been no further increase in momentum, and instead of continuing to rise today, AUD is expected to trade in a sideways range of 0.6885/0.6935.’ Instead of trading sideways, AUD fell to a low of 0.6858, closing at 0.6883 (-0.43%). Despite the decline, downward momentum only increases slightly. Today, we expect AUD to edge lower to 0.6850. The major support at 0.6820 is not expected to come under threat. Resistance levels are at 0.6900 and 0.6920.”

1-3 WEEKS VIEW: “In our most recent narrative from Monday (30 Sep, spot at 0.6910), we indicated that ‘while the recent price action suggests that AUD is likely to edge higher, it remains to be seen if there is enough momentum for AUD to reach 0.6980.’ We added, ‘a breach of 0.6860 (‘strong support’ level) would mean that AUD is not advancing further. In NY trade, AUD fell to a low of 0.6858. Despite the slight breach of our ‘strong support’ level, upward momentum has largely dissipated. AUD has likely entered a range trading phase, and it is expected to trade between 0.6820 and 0.6935 for the time being.”

• AUD/USD trades flat around 0.6880 in Wednesday’s early Asian session. 
• Fed’s Powell seems to favor a gradual easing path. 
• China’s stimulus plans and hawkish RBA might support the Aussie in the near term. 

The AUD/USD pair flatlines near 0.6880 during the early Asian session on Wednesday. Howver, the fear of wider war in the Middle East might boost the safe-haven flows and support the Greenback for the time being. Later on Wednesday, the US ADP Employment Change data is due, along with the speech from US Federal Reserve (Fed) Thomas Barkin, Raphael Bostic, Beth Hammack, Alberto Musalem, and Michelle Bowman. 

Earlier this month, the Fed decided to cut the federal funds rate by half a percentage point instead of the usual quarter point. However, Fed Chair Jerome Powell indicated on Monday that the Fed was not on any preset course in respect of monetary policy. According to the CME Group's FedWatch Tool, interest rate futures contracts have priced in a nearly 37.4% chance of a half-point cut in November, versus a 62.6% possibility of a quarter-point cut.

Meanwhile, the geopolitical risks might cap the downside for the US Dollar (USD). Bloomberg reported that Iran launched over 200 ballistic missiles at Israel on Tuesday after the US had warned just hours before that a strike was imminent. Israeli Prime Minister Benjamin Netanyahu vows to retaliate against Iran for a missile attack on Tuesday, but Tehran warned that any response would result in "vast destruction," fuelling fears of a wider war.

On the Aussie front, China’s fresh stimulus measures might continue to underpin the China-proxy Australian Dollar (AUD) as China is the largest trading partner of Australia. Additionally, the hawkish stance from the Reserve Bank of Australia (RBA) could contribute to the AUD’s upside. 

• AUD/USD edges lower to 0.6900 as the US Dollar gains firm footing.
• The US Dollar bounces back as traders brace for a slew of US data.
• Fed Powell pushed back large rate cut expectations for November.

The AUD/USD pair exhibits a subdued performance near the crucial support of 0.6900 in Tuesday’s European session. The Aussie asset faces slight selling pressure as the US Dollar (USD) bounces back strongly after the Federal Reserve (Fed) Chair Jerome Powell pushed back market speculation for another interest rate cut of 50 basis points (bps) in November.

The CME FedWatch tool shows that the probability of the Fed reducing interest rates by 50 basis points (bps) to 4.25%-4.50% in November has eased to 39% from 58% a week ago.

S&P 500 futures have posted some losses in the European session, portraying a cautious market mood. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises sharply to near 101.00. However, 10-year US Treasury yields tumble to near 3.75%.

Fed Powell commented on Monday at the National Association for Business Economics conference that policymakers don’t feel for cutting interest rates quickly. In the latest Fed dot plot, officials forecasted the Federal Fund Rate heading to 4.4% by the year-end, indicating that there will be two quarter-to-a-percentage rate cuts in each of the two meetings remaining this year.

On the economic front, investors will focus on the United States (US) JOLTS Job Openings data for August and the ISM Manufacturing PMI for September, which will be published at 14:00 GMT.

Meanwhile, the near-term appeal of the Australian Dollar (AUD) remains firm as Australia’s economic outlook has been improved by China’s massive liquidity stimulus. China's cabinet reported on Sunday that it will focus on solving outstanding economic problems and strive to complete annual economic and social development goals, Reuters reported. Being a proxy for China’s economic growth, the Australian Dollar has benefitted from the stimulus announcement.

The Australian Dollar (AUD) is expected to trade in a sideways range of 0.6885/0.6935. In the longer run, AUD is likely to edge higher; it remains to be seen if there is enough momentum for it to reach 0.6980, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

May have enough momentum for AUD to reach 0.6980

24-HOUR VIEW: “Two days ago, AUD rose to 0.6937 and then pulled back slightly. Yesterday, we highlighted that ‘although upward momentum has not increased much, there is room for AUD to test 0.6940 before another pullback is likely.’ AUD subsequently rose to 0.6944, pulling back to close at 0.6913 (+0.13%). There has been no further increase in momentum, and instead of continuing to rise today, AUD is expected to trade in a sideways range of 0.6885/0.6935.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (30 Sep, spot at 0.6910). As indicated, while the recent price action suggests that AUD is likely to edge higher, it remains to be seen if there is enough momentum for AUD to reach 0.6980. On the downside, a breach of 0.6860 (‘strong support’ level was at 0.6845 yesterday) would mean that AUD is not advancing further.”

• AUD/USD climbs to 0.6913, rebounding from a daily low of 0.6894, despite hawkish hints from Fed Chair Powell.
• Traders eye upcoming US ISM Manufacturing PMI and nonfarm payroll data, with an expected increase of 146K in September payrolls.
• Aussie’s Judo Bank Manufacturing PMI expected to contract.

The Aussie Dollar ended September on a higher note, posting gains of over 0.22% against the Greenback, even though Federal Reserve Chairman Jerome Powell was slightly ‘hawkish’ in a speech. The AUD/USD trades at 0.6913 after bouncing off daily lows of 0.6894.

AUD/USD posts 0.22% gains as markets eye US economic data and Fed rate cuts

Wall Street printed minimal gains on Monday as investors shrugged off Fed Chair Powell's remarks that they will lower rates “over time.” Powell said, “This is not a committee that feels like it’s in a hurry to cut rates quickly,” adding that incoming data will guide them.

On the data front, the Chicago PMI increased 0.5% from 46.1 to 46.6 in September. The employment sub-component index rose 5.0 points, snapping two straight months of declines.

Other Fed speakers crossed the wires. Atlanta’s Fed President Raphael Bostic said he’s open to a 50-basis-point rate cut if job data warrants it. Meanwhile, Chicago’s Fed Austan Goolsbee stated he sees a case for extensive US interest rate cuts based on the economy's stance.

Aside from this, traders should be eyeing the release of ISM Manufacturing PMI data on Tuesday. However, the spotlight will be on nonfarm payroll data for September, which is expected to increase by 146K vs. 142K in August. The unemployment rate is foreseen at 4.2%, unchanged compared to the previous reading.

On the Aussie side, the Judo Bank Manufacturing PMI for September in its final reading is foreseen to contract further, from 48.5 to 46.7, according to the consensus. For August, other data, like Building Permits and Retail Sales, are foreseen to show weakening signs.

AUD/USD Price Forecast: Technical outlook

The AUD/USD is upward biased, though printing a doji and a shooting star back-to-back candlesticks hints that the pair could drop from current levels.

Momentum suggests the pair could consolidate, as the Relative Strength Index (RSI) turned flat at bullish territory.

Hence, the AUD/USD first resistance would be the year-to-date (YTD) high at 0.6942, followed by the 0.7000 figure. Conversely, a drop below 0.6900 will expose the September 27 low of 0.6867, followed by the September 25 low of 0.6817.

Room for the Australian Dollar (AUD) to test 0.6940 before a pullback is likely. In the longer run, AUD is likely to edge higher; it remains to be seen if there is enough momentum for it to reach 0.6980, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD is likely to edge higher towards 0.6980

24-HOUR VIEW: “We highlighted last Friday that AUD ‘could edge higher, but it is unlikely to be able to break above 0.6930.’ AUD then rose more than expected to 0.6937 before pulling back to close largely unchanged at 0.6902 (+0.09%). Although upward momentum has not increased much, there is room for AUD to test 0.6940 today before another pullback is likely. The major resistance at 0.6980 is not expected to come under threat. Support levels are at 0.6890 and 0.6870.”

1-3 WEEKS VIEW: “Last Thursday (26 Sep, spot at 0.6825), we indicated that ‘the advance in AUD has come to an end, and it is likely to trade between 0.6750 and 0.6900 for now.’ After AUD rose above to 0.6905, we indicated on Friday (27 Sep, spot at 0.6890) that ‘upward momentum has not increased sufficiently to indicate that AUD is ready to rise in a sustained manner.’ We added, ‘AUD has to break and remain above 0.6930 before an advance to 0.6980 can be expected.’ AUD subsequently rose to 0.6937, pulling back to close at 0.6902 (+0.09%). Although upward momentum has not increased as much as we would prefer, the price action suggests that AUD is likely to edge higher from here. However, it remains to be seen if there is enough momentum for AUD to reach 0.6980. On the downside, the ‘strong support’ level has moved higher to 0.6845 from 0.6820.”

• AUD/USD clings to gains above 0.6900 ahead of Fed Powell’s speech.
• An expected acceleration in the US core PCE inflation has weighed on market expectations for the Fed's large rate cut in November.
• The Australian Dollar outperforms its major peers on China’s massive stimulus to uplift the economic growth.

The AUD/USD holds gains above the key level of 0.6900 in Monday’s European session. The Aussie asset strengthens as the Australian Dollar (AUD) performs strongly on the announcement of China’s fiscal support to revive their economic prospects.

Their cabinet reported on Sunday that it will focus on solving outstanding economic problems and strive to complete annual economic and social development goal, Reuters reported. It is worth noting that Australia is the leading trading partner of China and signs of an improvement in the latter’s economic performance strengthens the appeal of the Aussie Dollar.

However, the Caixin Manufacturing PMI sank in September to 49.3 from the former reading of 50.4. A figure below the 50.0 threshold is itself considered as contraction in activities in the manufacturing sector.

Meanwhile, the US Dollar (USD) exhibits a weak performance ahead of the Federal Reserve’s (Fed) Chair Jerome Powell’s speech, which is scheduled at 17:00 GMT. Investors would look for fresh cues about the likely monetary policy action from the Fed in November.

According to the CME FedWatch tool, the probability of the Fed to reduce interest rates by 50 basis points (bps) to 4.25%-4.50% in November has eased sharply to 38.3% from 53% last week. Market speculation for Fed large rate cuts eased after the release of the United States (US) core Personal Consumption Expenditure Price Index (PCE) data on Friday, which rose expectedly to 2.7% in August from 2.6% in July.

• AUD/USD trades in positive territory for the third consecutive day near 0.6910 in Monday’s early Asian session. 
• US headline PCE rose less than expected in August. 
• China’s stimulus measures and the hawkish stance of the RBA underpin the Aussie. 

The AUD/USD pair extends its upside to around 0.6910 during the early Asian session on Monday. The rising bets for another oversized interest rate cut by the Federal Reserve (Fed) in November weigh on the US dollar (USD). The Chinese Purchasing Managers Index (PMI) reports for September are due later on Monday. 

The US inflation data, as measured by the Personal Consumption Expenditures (PCE) Price Index, eased more than expected to 2.2% YoY in August, paving the way for the US central bank to cut interest rates again in November, which drags the US Dollar (USD) lower broadly. On a monthly basis, the PCE Price Index increased by 0.1%, in line with the consensus. Meanwhile, the core PCE Price Index, which excludes the more volatile categories of food and energy, climbed by 2.7% YoY in the same period, matching market expectations. 

University of Michigan's Consumer Sentiment Index came in better than the estimations, rising to 70.1 in September from 66.0 in August. Investors are now pricing in nearly 52.8% odds of a 50 basis points (bps) interest rate cut in November, while the chance of a smaller quarter-point move stands at 47.2%, according to the CME FedWatch Tool. 

On the other hand, fresh China’s stimulus measures continue to fuel the risk-on rally and boost the China-proxy Australian Dollar (AUD). Additionally, the hawkish stance of the Reserve Bank of Australia (RBA) contributes to the Aussie’s upside. The RBA kept its cash rate at 4.35% for a seventh consecutive meeting and stated that the policy would need to stay restrictive to ensure inflation slowed.

 

• AUD/USD breaks out of the top of a range and rallies. 
• It has reached an initial bullish target and there is a risk it could soon pull back.  

AUD/USD breaks above its range highs and follows through to the upside on Friday. 

It is in a short-term uptrend which given the principle that “the trend is your friend” is more likely to extend than not. 

AUD/USD Daily Chart 

The next target to the upside is 0.6988 (14 February ‘23 swing high), followed by 0.7156 in a bullish case (2 February ‘23 high). 

The pair is not overbought according to the Relative Strength Index (RSI) momentum indicator and so has breadth for more upside. 

AUD/USD has reached an initial upside target based on extrapolating the August rally from the base of the early September correction, higher by a 61.8% Fibonacci. This target lies at around 0.6115 and has already been surpassed. This could indicate the trend has no higher to go and the pair will pull back. There are no signs yet from price action that this is about to occur.

The Australian Dollar (AUD) could edge higher, but it is unlikely to be able to break above 0.6930. In the longer run, AUD has to break and remain above 0.6930 before an advance to 0.6980 can be expected, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD has to remain above 0.6930 to advance towards 0.6980

24-HOUR VIEW: “We highlighted yesterday that AUD ‘could dip below 0.6800 before stabilisation can be expected.’ However, AUD rebounded strongly, reaching a high of 0.6905. The strong rebound has resulted in an increase in momentum, albeit not much. Today, we expect AUD to edge higher, but it is unlikely to be able to break above 0.6930. Support is at 0.6875; a breach of 0.6840 would mean that the current mild upward pressure has eased.”

1-3 WEEKS VIEW: “After holding a positive AUD view for more than a week, we shifted to a neutral stance yesterday (26 Sep, spot at 0.6825), indicating that ‘the advance in AUD has come to an end, and it is likely to trade between 0.6750 and 0.6900 for now.’ We did expect AUD to reverse its decline as it soared to a high of 0.6905. Despite the advance, upward momentum has not increased sufficiently to indicate that AUD is ready to rise in a sustained manner. AUD has to break and remain above 0.6930 before an advance to 0.6980 can be expected. The chance of AUD breaking clearly above 0.6930 will remain intact, provided that it stays above 0.6820.”

• AUD/USD struggles for a firm intraday direction amid mixed fundamental cues.
• The optimism over China’s stimulus measures lends some support to the Aussie. 
• A modest USD strength caps spot prices ahead of the key US PCE Price Index. 

The AUD/USD pair oscillates in a narrow trading band below the 0.6900 mark through the first half of the European session on Friday and remains close to its highest level since February 2023 touched earlier this week. 

The US Dollar (USD) attracts some buyers ahead of the US Personal Consumption Expenditure (PCE) Price Index and turns out to be a key factor acting as a headwind for the AUD/USD pair. That said, bets for another oversized interest rate cut by the Federal Reserve (Fed) in November hold back the USD bulls from placing aggressive bets. Apart from this, the upbeat market mood caps the safe-haven buck and lends some support to the risk-sensitive Aussie.

The global risk sentiment gets an additional boost after the People's Bank of China (PBOC) cut the seven-day repo rate to 1.5% from 1.7% and lowered the Reserve Requirement Ratio (RRR) by 50 bps. This comes on top of a slew of stimulus measures announced this week, which continues to fuel the risk-on rally across the global equity markets and underpins the China-proxy Australian Dollar (AUD) amid the Reserve Bank of Australia's (RBA) hawkish stance. 

In fact, the Australian central bank reiterated on Tuesday that policy will need to be restrictive until confidence returns that inflation is moving sustainably towards the target range. Adding to this, RBA Governor Michele Bullock stated that the recent data has not significantly influenced the policy outlook. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the upside and supports prospects for an extension of over a two-week-old rally.

• AUD/USD recovers sharply from 0.6820 as the Australian Dollar strengthens.
• Investors await Fed Powell’s speech for fresh interest rate guidance.
• The core PCE inflation is expected to have accelerated to 2.7% in August.

The AUD/USD pair bounces back strongly from Wednesday’s low of 0.6820 to near the round-level resistance of 0.6900 in Thursday’s North American session. The Aussie asset strengthens amid upbeat Australian Dollar (AUD).

The Aussie Dollar performs strongly as the Reserve Bank of Australia (RBA) is expected to leave interest rates at their current levels for the entire year. In the monetary policy on Tuesday, the RBA kept its Official Cash Rate (OCR) steady to 4.35% and conveyed that the option of more rate hikes was not on the table.

Meanwhile, the US Dollar (USD) exhibits a sluggish performance near the crucial resistance of 101.00. The US Dollar struggles to extend recovery as investors look for Federal Reserve (Fed) Chair Jerome Powell’s speech to get fresh cues on the interest rate outlook.

Currently, financial market participants expect that the Fed could deliver one another 50 basis points (bps) interest rate cut in November. Last week, the Fed started the policy-easing cycle with a larger-than-usual interest rate cut of 50 bps to 4.75%-5.00%.

Going forward, investors will focus on the United States (US) Personal Consumption Expenditure Price Index (PCE) data for August, which will be published on Friday.

Economists estimate the core PCE inflation data, a Fed’s preferred inflation gauge, to have grown at a faster rate of 2.7% from 2.6% in July. Signs of inflation remaining persistent would prompt market expectations for the Federal Reserve (Fed) to cut interest rates by 50 basis points (bps) in the November meeting. On the contrary, hot figures would dampen them.

• AUD/USD price grapples to break above the lower boundary of the ascending channel around the level of 0.6860.
• The 14-day RSI remains above the 50 level, suggesting that bullish sentiment is still intact.
• A successful return into the channel would strengthen the bullish bias for the pair.

AUD/USD retraces its recent losses from the previous session, trading around 0.6860 during the European hours on Thursday. Technical analysis of the daily chart shows the pair attempting to break above the lower boundary of an ascending channel pattern. A successful return to the channel would strengthen the bullish outlook.

The 14-day Relative Strength Index (RSI) remains above the 50 level, suggesting that bullish sentiment is still intact. A further move toward the 70 level would strengthen the upside trend for the pair.

On the upside, the AUD/USD pair is testing the lower boundary of the ascending channel at the 0.6860 level. A successful rebound into the channel would provide support for the pair to move toward the upper boundary, located around the 0.6960 level.

In terms of support, the AUD/USD pair may find immediate support at the nine-day Exponential Moving Average (EMA) around the 0.6815 level. The next key support level is the psychological barrier at 0.6700. A drop below this level could drive the pair further down toward its six-week low of 0.6622, which was recorded on September 11.

AUD/USD: Daily Chart

The Australian Dollar (AUD) could dip below 0.6800 before stabilisation is likely; the next support at 0.6750 is not expected to come into view. In the longer run, advance in AUD has come to an end; it is likely to trade between 0.6750 and 0.6900 for now, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

Advance in AUD has come to an end

24-HOUR VIEW: “We expected AUD to ‘continue to rise yesterday.’ Our view was incorrect, as it sold off sharply instead, plunging to a low of 0.6817 (closed at 0.6823, -1.00%). The sharp drop could dip below 0.6800 before stabilisation is likely. The next support at 0.6750 is not expected to come into view. On the upside, if AUD breaks above 0.6865 (minor resistance is at 0.6845), it would indicate that the weakness has stabilised.”

1-3 WEEKS VIEW: “We have held a positive AUD view since early last week. As we tracked the advance, in our update from yesterday (25 Sep, spot at 0.6900), we held the view that it ‘could advance further to 0.6955.’ We indicated that ‘the positive outlook is intact as long as 0.6820 (‘strong support’ level) is not breached.’ We did not expect the sharp and swift drop, as AUD plummeted to a low of 0.6817. The price action indicates that the advance in AUD has come to an end. AUD has likely moved into a range trading phase, and it is likely to trade between 0.6750 and 0.6900 for now.”