Australian Dollar Forecast: AUD/USD Bearish Price Series Persists

Australia Dollar Outlook: AUD/USD

AUD/USD attempts to halt a five-day selloff after showing a kneejerk reaction to the US Consumer Price Index (CPI), but the exchange rate may continue to give back the advance from the September low (0.6622) as it extends the series of lower highs and lows carried over from last week.

Australian Dollar Forecast: AUD/USD Bearish Price Series Persists

AUD/USD rebounds from a fresh weekly low (0.6701) even though the US CPI prints at 2.4% in September versus forecasts for a 2.3% reading, and it remains to be seen if the Federal Reserve will respond to the development as the minutes from the September meeting reveals that ‘almost all participants judged that recent monthly readings had been consistent with inflation returning sustainably to 2 percent.’

The FOMC Minutes suggest the central bank will continue to switch gears as ‘almost all participants saw upside risks to the inflation outlook as having diminished,’ and Chairman Jerome Powell and Co. may take further steps to avoid a recession as ‘participants agreed that labor market indicators merited close monitoring.’

US Economic Calendar

However, the update to the Produce Price Index (PPI) may force the FOMC to further combat inflation as the core rate is expected to increase to 2.7% in September from 2.4% per annum the month prior, and signs of sticky price growth may generate a bullish reaction in the US Dollar as it curbs speculation for another 50bp Fed rate cut.

At the same time, a softer-than-expected PPI print may drag on the Greenback as Chairman Powell and Co. pursue a neutral policy, and the diverging paths between the Fed and Reserve Bank of Australia (RBA) may prop up AUD/USD over the remainder of the year as the RBA insists ‘that monetary policy would need to be sufficiently restrictive until members were confident that inflation was moving sustainably towards the target range.’

With that said, AUD/USD may retrace the decline from the start of the month should it extend the rebound from the weekly low (0.6701), but the bearish price action in the exchange rate may persist as the Relative Strength Index (RSI) falls to its lowest level since August.

AUD/USD Price Chart – Daily

Chart Prepared by David Song, Strategist; AUD/USD on TradingView

• AUD/USD may hold within the September range as it attempts to halt a five-day selloff, and the exchange rate may snap the series of lower highs and lows on a close above 0.6740 (38.2% Fibonacci retracement).
• A break/close above the 0.6810 (23.6% Fibonacci extension) to 0.6820 (23.6% Fibonacci retracement) region may push AUD/USD back towards 0.6870 (38.2% Fibonacci retracement), with a breach above the 0.6920 (50% Fibonacci retracement) to 0.6930 (23.6% Fibonacci retracement) area bringing the monthly high (0.6935) on the radar.
• However, AUD/USD may continue to give back the advance from the September low (0.6622) should the bearish price series persist, with a break/close below the 0.6590 (38.2% Fibonacci extension) to 0.6600 (23.6% Fibonacci retracement) zone opening up the 0.6510 (38.2% Fibonacci retracement) to 0.6520 (23.6% Fibonacci retracement) region.

Additional Market Outlooks

USD/JPY Defends Post-NFP Reaction with CPI Report in Focus

NZD/USD on Cusp of Testing September Low Ahead of RBNZ Rate Decision

Gold Price Weakness Pulls RSI Back from Overbought Zone

GBP/USD Bull-Flag Breakout Fizzles to Keep RSI Below 70

--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong