- AUD/USD gives away part of last week’s strong advance.
- The decent recovery in the US Dollar weighs on the pair.
- The RBA’s S. Hunter speaks later on Monday.
The renewed bid bias in the US Dollar (USD) prompted a corrective move in the risk complex, motivating AUD/USD to put the 0.6600 support to the test at the beginning of the week following Friday’s fresh two-month peaks around 0.6670.
In the meantime, the continued decline in US yields across various timeframes appears to have met some contention and moved into a consolidative theme, always on the back of ongoing speculation regarding the Federal Reserve’s (Fed) anticipated initial interest rate cut, expected in June.
Further range-bound trade, however, should remain well in the pipeline for the pair in the very near term, at least, as investors await the release of key US inflation figures tracked by the CPI for the month of February, expected on March 12.
In addition to the negative sentiment surrounding the Aussie dollar emerged the resumption of the downside pressure around prices of iron ore on the back of rising inventories in China, which in turn reflects the increasing uncertainty around its housing sector.
Speaking about China, developments in that economy are likely to influence the AUD. Potential stimulus measures could offer temporary relief, but sustained improvements in economic indicators are crucial for strengthening the Australian currency and potentially initiating a significant upward trend in AUD/USD.
Furthermore, the cautious approach of the Reserve Bank of Australia (RBA), which is one of the last major central banks considering interest rate cuts, acts as a limiting factor on the downside potential of the pair.
On the back of the difference in timing regarding the start of the easing cycle by both the RBA and the Fed, the Aussie dollar could find extra wings in the latter part of the year, which could in turn morph into further advances in AUD/USD. That said, once the December 2023 top of 0.6871 is cleared, spot could embark on a potential visit to the key milestone of 0.7000 in the not-so-distant future.
AUD/USD daily chart
AUD/USD short-term technical outlook
Once AUD/USD clears the March peak of 0.6667 (March 8), a test of the December 2023 high of 0.6871 (December 28) should emerge on the horizon, followed by monthly tops of 0.6894 (July 14) and 0.6899 (June 16), all before the important 0.7000 milestone.
On the other hand, if sellers regain control, the pair may face early support around the March low of 0.6477 (March 5), which precedes the 2024 bottom of 0.6442 (February 13). Breaking below this level might lead to a visit to the 2023 low of 0.6270 (October 26), seconded by the round level of 0.6200 and the 2022 low of 0.6169 (October 13).
It is worth mentioning that the AUD/USD’s favourable bias should persist when above the crucial 200-day SMA at 0.6560.
According to the 4-hour chart, spot came under some selling pressure and initially targets the 200-SMA at 0.6542, followed by 06477 and finally 0.6442. On the flip side, the immediate hurdle emerges at 0.6667, prior to 0.6728 and 0.6871. Furthermore, the MACD remains in the positive territory, and the RSI settles around 56.
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