Australian Dollar Short-term Outlook: AUD/USD Rebound Challenges September Downtrend

Australian Dollar Technical Outlook: AUD/USD Short-term Trade Levels

• AUD/USD has rebounded from technical support as buyers attempt to stabilize the sharp September decline.
• The pair is testing the upper boundary of the downtrend, but upside momentum remains relatively subdued.
• A confirmed break higher would strengthen the case that a more significant recovery is developing.
• Failure to clear trend resistance would keep the broader bearish structure intact and leave Aussie vulnerable to renewed selling pressure.
• The weekly range remains unresolved, increasing the importance of the breakout for near-term directional guidance.
• Resistance 7167/72, 7208/14 (key), 7258- Support 7120, 7100 (key), 7080

AUD/USD is attempting to stabilize after a sharp month-long decline carried the pair into a major support zone last week. The rebound has now brought Aussie back to an important technical threshold, where buyers are trying to break the descending structure that has governed price action since the September high. While the recovery has improved the immediate picture, momentum remains relatively muted and the weekly range has yet to resolve, leaving the next close particularly important. Attention then turns to next week’s U.S. CPI report, where another soft inflation reading could reinforce expectations for a patient Fed and give the recovery more room to develop. Battle lines drawn on the Aussie short-term technical charts.

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Australian Dollar Price Chart – AUD/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView

Technical Outlook: In last month’s Australian Dollar Short-term Outlook we noted that AUD/USD was testing multi-week uptrend support at the monthly range lows and that, “From a trading standpoint,  rallies would need to be limited to 7172 IF price is heading lower on this stretch with a close below 7100 needed to fuel the next major leg of the decline.” Aussie broke lower the following day with price plunging more than 4.6% off the September high before rebounding off support into the start of October at the 88.6% retracement of the late-June advance near 6908. The subsequent recovery has extended more than 1.2% off the monthly low with AUD/USD attempting to break the September downtrend today. The focus is on today’s close with respect to this slope as the bulls try to snap a four-week losing streak.

Australian Dollar Price Chart – AUD/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView

Notes: A closer look at Aussie price action shows AUD/USD trading within the confines of a descending pitchfork extending off the September high. The weekly range is preserved ahead of the close, and a breakout is likely to offer directional guidance in the days ahead.

Initial resistance is eyed at the 61.8% retracement of the June rally at 7008. This level converges on near-term channel resistance (red) into the start of next week.  A breach / daily close above the 38.2% retracement of the September decline and the 200-day moving average at 7032/37 would ultimately be needed to suggest a more significant low is in place, and a larger trend reversal is underway. Subsequent resistance objectives are eyed at the 1.618% extension of the monthly advance, and the May swing low at 7072/80- look for a larger reaction there IF reached.

Monthly open support rests at 6946 and is again backed by the 88.6% retracement at 6908. A break / close below this threshold would be needed to mark resumption of the broader downtrend towards the June low at 6865 with the next major technical consideration eyed at  the March low / 50% retracement of the November rally at 6822/33.

           

Bottom line: AUD/USD is attempting to break out of a multi-week downtrend today, but the rally seems to lack any meaningful momentum at the moment. From a trading standpoint, losses would need to be limited to 6946 IF price is heading higher on this stretch with a close above 7032 needed to fuel the next major leg of the recovery.

The focus for AUD/USD next week shifts to key U.S. inflation data, with the September Consumer Price Index (CPI) report likely to be the primary catalyst. Following a string of softer-than-expected inflation readings, markets have scaled back expectations for an October Fed hike to below 20%, although futures still imply more than an 85% probability of additional tightening before year-end. A hotter-than-expected CPI print could revive expectations for a more aggressive policy path, supporting the U.S. dollar and pressuring the Aussie. Conversely, further evidence of easing inflation could reinforce expectations for a more patient Fed and offer AUD/USD some relief. Stay nimble into the release and watch the weekly close for guidance. Review my latest Australian Dollar Weekly Forecast for a closer look at the longer-term AUD/USD technical trade levels.

Key AUD/USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex