Australian Dollar Forecast: AUD/USD Under Pressure as RBA Shifts Policy Stance

RBA Under the Spotlight

On Wednesday, October 9, the RBA and the AUD/USD will be in focus. RBA Assistant Governor Christopher Kent is on the calendar to speak. His reaction to August’s Monthly CPI Indicator and his views on inflation and the labor market could influence Aussie dollar demand.

The Monthly CPI Indicator dropped from 3.5% in July to 2.7% in August, putting headline inflation within the RBA’s target range. Support for a possible Q4 2024 RBA rate cut could drive the AUD/USD toward $0.67.

The RBA and the Aussie Dollar

On Tuesday, the latest RBA Meeting Minutes affected demand for the Aussie dollar. Board members viewed the current cash rate as appropriate to balance the risks to inflation and the labor market. However, the RBA removed language implying it was unlikely to reduce the cash rate in the short term, indicating a more dovish stance compared to the previous meeting.

During September’s RBA press conference, RBA Governor Michele Bullock stated that headline inflation may come within the target range but may not reflect underlying inflation. The RBA Governor also said that Board members did not explicitly discuss an interest rate hike, a significant shift from previous warnings of a rate hike if inflation did not cool.

The more dovish stance impacted Aussie dollar demand.

Will Fed Commentary Shift AUD/USD Trends?

Later in the Wednesday session, investors should shift their focus to the FOMC Meeting Minutes and Fed speakers.

The FOMC Meeting Minutes could reveal the conditions supporting aggressive Q4 2024 Fed rate cuts. However, the Minutes may impact the AUD/USD pair less than normal. Concerns among FOMC members about the US labor market had fueled bets on a 50-basis point November Fed rate cut ahead of September’s US Jobs Report.

FOMC member speeches may impact the AUD/USD. Fed Vice Chair John Williams and FOMC members Thomas Barkin, Austan Goolsbee, and Philip Jefferson are on the calendar to speak. Their views on inflation, the labor market, and the Fed rate path could move the dial.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends will likely hinge on RBA speeches, Fed commentary, and the US CPI Report. While dovish RBA commentary may impact Aussie dollar demand, the US CPI Report could be pivotal.

A hotter-than-expected inflation print could reduce bets on a 25-basis point November Fed rate cut, possibly driving the AUD/USD below $0.67. Conversely, softer-than-expected US inflation could reignite bets on a 50-basis point Fed rate cut, potentially sending the AUD/USD toward $0.68500.

Investors should closely monitor central bank signals and economic indicators that may influence AUD/USD trends. Beyond the economic calendar, news updates on the Middle East conflict also need monitoring. Risk aversion could retrigger a flight to safety, impacting commodity currencies, including the Aussie dollar.

AUD/USD Technical Analysis

Daily Chart: AUD/USD Breakout Intact

The AUD/USD hovers below the 50-day EMA while remaining above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

A break above the 50-day EMA would support a move toward the $0.68006 resistance level. Furthermore, a breakout from the $0.68006 resistance level could signal a return to $0.68500.

Traders should consider the FOMC Meeting Minutes and central bank commentary, which may influence AUD/USD price movements.

Conversely, a break below the $0.67050 support level could give the bears a run at the 200-day EMA.

With a 14-period Daily RSI reading of 44.10, the Aussie dollar could drop below the $0.67050 support level before entering oversold territory.