AUD/USD Price Forecast: Bulls Struggle to Commit Above 0.6800
The AUD/USD pair has experienced a slight recovery, attracting some dip-buying activity on Monday. Despite this uptick, the bullish momentum appears weak, with no significant follow-through buying. This lack of conviction among the bulls suggests that caution is warranted before expecting further gains in the pair. The technical setup and broader market conditions continue to provide a challenging environment for traders.
A Temporary Break from a Two-Day Losing Streak
The AUD/USD pair began the new trading week on a positive note, snapping a two-day losing streak. After pulling back from its highest levels since February 2023, which it touched the previous Monday, the pair saw some recovery. Currently, the pair is trading slightly above the 0.6800 mark, marking a 0.20% increase for the day. However, despite this upward movement, the lack of strong follow-through buying suggests that bullish traders remain hesitant.
Support from Risk-On Sentiment and RBA’s Stance
One of the key factors contributing to the slight recovery in AUD/USD is the improved risk sentiment in the market. The US monthly employment data released on Friday showed better-than-expected results, easing concerns about a potential economic slowdown. Additionally, optimism surrounding China’s stimulus measures has added to the overall risk-on mood, benefiting risk-sensitive assets like the Australian Dollar (AUD).
Moreover, the Reserve Bank of Australia (RBA) has maintained a hawkish stance, which has further supported the AUD. However, despite these positive factors, the AUD/USD pair continues to face headwinds, largely due to the ongoing strength of the US Dollar.
The Bullish US Dollar Acts as a Headwind
The US Dollar has maintained its strength amid fading expectations for aggressive policy easing by the Federal Reserve (Fed). Geopolitical tensions, particularly in the Middle East, have also bolstered the demand for safe-haven assets, such as the USD. This strength in the USD has acted as a significant obstacle to the AUD/USD pair’s upward momentum, limiting its ability to sustain a rally above the 0.6800 mark.
Technical Outlook: Support and Resistance Levels
From a technical perspective, the AUD/USD pair has seen some notable movements. Spot prices on Friday found support near the 0.6785 region, which corresponds to the 50% Fibonacci retracement level of the September move-up. This area has provided a temporary floor for the pair, helping it avoid further declines.
Immediate Resistance at 38.2% Fibonacci Level
The subsequent recovery from the 0.6785 support level suggests some potential for further upside. However, the 38.2% Fibonacci retracement level, located around 0.6820, is likely to act as an immediate resistance. Bulls will need to push prices above this level to accelerate the positive momentum.
Key Resistance Levels to Watch
If the AUD/USD pair manages to break through the 0.6820 resistance, it could aim for the 0.6865-0.6870 region, which is near the 23.6% Fibonacci level. Clearing this level would signal that the recent corrective slide has run its course, prompting fresh buying interest. In such a scenario, the pair could attempt to reclaim the 0.6900 round-figure mark.
Beyond 0.6900, the pair could extend its gains toward the 0.6940-0.6945 region, which represents the year-to-date (YTD) peak reached last week. A sustained break above this level could pave the way for further bullish moves, potentially targeting higher levels in the medium term.
Bearish Traders Await a Break Below 50% Fibonacci Level
On the flip side, bearish traders are likely to wait for a decisive break and sustained trading below the 50% Fibonacci retracement level at 0.6785 before placing fresh bets. A clear break below this level would open the door for further declines.
Key Support Levels to Monitor
If the AUD/USD pair breaks below 0.6785, the next target for bearish traders would be the 61.8% Fibonacci retracement level, located around 0.6745. A drop to this level would indicate that the bearish momentum is gaining strength.
If the selling pressure continues, the pair could eventually slide toward the sub-0.6700 levels, where the 100-day Simple Moving Average (SMA) lies. This level would serve as a critical support area, and a break below it could signal a deeper bearish trend for the AUD/USD pair.
Broader Market Sentiment: A Mixed Bag
The broader market sentiment remains mixed for the AUD/USD pair. On the one hand, the risk-on mood fueled by China’s stimulus and the RBA’s hawkish stance has provided some support for the Australian Dollar. On the other hand, the strong US Dollar continues to act as a significant headwind, preventing the pair from gaining sustained upward momentum.
US Economic Data and Fed Policy
The direction of the AUD/USD pair will largely depend on future developments in US economic data and Federal Reserve policy. Should the Fed maintain its current stance and delay any aggressive policy easing, the USD is likely to remain strong, which could continue to pressure the AUD/USD pair.
Conversely, any signs of economic weakness in the US or a shift toward a more dovish Fed policy could ease the USD’s strength and provide some relief for the AUD/USD pair.
Geopolitical Tensions and Safe-Haven Demand
Geopolitical tensions, particularly in the Middle East, have increased demand for safe-haven assets like the US Dollar. If these tensions escalate further, the USD could strengthen even more, which would likely exacerbate the downward pressure on the AUD/USD pair.
Caution is Key for Traders
In conclusion, the AUD/USD pair remains at a critical juncture, with bulls and bears both facing key technical levels. While the pair has attracted some dip-buying, the lack of bullish conviction suggests that traders should exercise caution before positioning for any significant appreciating move.
For bullish traders, a break above the 0.6820 level would be a positive sign, potentially leading to further gains toward the 0.6865-0.6870 region and possibly the 0.6900 mark. However, if the pair fails to sustain its recovery and breaks below the 0.6785 support level, bearish traders could target the 0.6745 region and eventually the sub-0.6700 levels.
Overall, the technical setup warrants caution, with both bullish and bearish traders needing to wait for clearer signals before committing to fresh positions. The strength of the US Dollar and broader market sentiment will play a crucial role in determining the AUD/USD pair’s future direction.
