AUD/USD Price Forecast: Bulls seem hesitant above 0.7000 as dovish RBA meets USD weakness

AUD/USD sticks to a positive bias for the second straight day amid a broadly weaker USD.
The RBA’s dovish outlook acts as a headwind for the Aussie ahead of the key US NFP report.
The technical setup warrants caution for bullish traders and positioning for further upside.

The AUD/USD pair attracts some buyers for the second straight day on Thursday as a Democratic sweep in US midterm elections and sliding US bond yields drag the US Dollar (USD) to a fresh low since late September. Spot prices hold above the 0.7000 psychological mark through the Asian session, though the lack of follow-through warrants caution before positioning for an extension of the previous day's solid recovery from the vicinity of mid-0.6900s, or a two-and-a-half-week low.

Аналитика TMGM: новости финансовых рынков, экономический календарь и рыночные инсайты

The Reserve Bank of Australia (RBA) delivered a dovish hike on Tuesday, signaling a shift toward a more cautious, wait-and-see stance. The central bank highlighted the rising risks to unemployment and dropped explicit references to potential future hikes from the official statement for the first time since June, lowering the probability of a move in December. This, in turn, is acting as a headwind for the Australian Dollar (AUD) and capping the AUD/USD pair.

RBA seen at peak as OCBC flags slowing economy and rising jobless rate

Analysts at OCBC highlight that the domestic backdrop is turning less supportive for further RBA tightening, pointing out that “the economy is slowing, housing prices have fallen significantly and the unemployment rate has risen”. Against this softer setting, they add that “we expect no more hike in this cycle, and the next policy move is likely to be a cut,” underscoring their view that the current cash rate marks the peak for this tightening phase.

Traders also seem hesitant to place aggressive directional bets and opt to wait for the release of the closely watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report. Moreover, speeches from influential FOMC members will be looked at for cues about the US Federal Reserve's (Fed) future policy path. Apart from this, developments surrounding the Middle East crisis will provide a fresh impetus to the USD and the AUD/USD pair.

From a technical perspective, the pair maintains a mildly bearish near-term bias below the 200-day Simple Moving Average (SMA) at 0.7058 and under a dense Fibonacci retracement band starting at the 38.2% level around 0.7024. Meanwhile, the Moving Average Convergence Divergence (MACD) shows a modest positive reading, and the Relative Strength Index (RSI) hovers near the neutral 50 line, only hinting at stabilization rather than a clear bullish reversal.

Hence, any subsequent move beyond the 38.2% Fibonacci retracement at 0.7024 is likely to face stiff resistance and remain capped near the 200-day SMA at 0.7058. This is followed by the 50.0% retracement at 0.7065, while additional barriers are seen at the 61.8% Fibo. at 0.7105, the 78.6% level is at 0.7163, and the cycle high is near 0.7236. On the downside, initial support emerges at the 23.6% Fibo. at 0.6974, ahead of a more substantial structural floor around the 0.6893 anchor of the current Fibonacci swing.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

AUD/USD daily chart

RBA FAQs

What is the Reserve Bank of Australia and how does it influence the Australian Dollar?

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

How does inflation data impact the value of the Australian Dollar?

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

How does economic data influence the value of the Australian Dollar?

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

What is Quantitative Easing (QE) and how does it affect the Australian Dollar?

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

What is Quantitative tightening (QT) and how does it affect the Australian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

Следующая статья