FX.co ★ AUD/USD: analysis and forecast

The AUD/USD pair has been trading lower for the fifth day in a row amid a modest strengthening of the US dollar.

The Australian dollar is extending its weakness due to disappointment over the latest updates on China's stimulus measures, which, combined with the moderate rise of the US dollar, is putting some downward pressure on the AUD/USD pair.

According to a statement by China's National Development and Reform Commission on Tuesday, the economy is struggling with complicated domestic and external challenges. However, the commission did not announce any new major stimulus plans. This overshadowed the relatively hawkish minutes from the Reserve Bank of Australia's September meeting.

Amid these developments and signs of a resilient US labor market, investors are downgrading their expectations for fast monetary policy easing by the Federal Reserve and a jumbo rate cut in November. In turn, this keeps the yield on the benchmark 10-year Treasuries above the critical 4% level, while the US dollar Index, which tracks the dollar's performance against a basket of currencies, remains close to the seven-week high reached last Friday. Additionally, a generally weaker tone in the stock markets is benefiting the safe-haven US dollar, putting further pressure on the risk-sensitive Australian dollar.

The fundamental backdrop supports the likelihood of a continued pullback in the AUD/USD pair from 0.6945, which is the highest level since February 2023.

However, the bears seem reluctant to fully commit, preferring to wait for additional signals regarding the Fed's agenda for interest rates before opening new positions. Therefore, market attention will be focused on the FOMC meeting minutes to be released on Wednesday during the New York session, followed by the US Consumer Price Index and Producer Price Index on Thursday and Friday, respectively.

From a technical viewpoint, the AUD/USD pair is attempting to break below the 50 SMA, while the Relative Strength Index (RSI) is in negative territory but far from the oversold zone. However, the MACD indicator has not yet shifted to negative territory. These mixed signals call for caution among bears, and it would be wise to wait for significant news before opening aggressive short positions.

The table below shows the percentage change of the US dollar against the major listed currencies today.

The US dollar was strongest against the New Zealand dollar.