AUD/USD Susceptible to Failed Test of 50-Day SMA

By :  ,  Strategist

AUD/USD Outlook

The recent rebound in AUD/USD appears to be stalling ahead of the 50-Day SMA (0.6663) as it struggles to extend the series of higher highs and lows from last week, and the Reserve Bank of Australia (RBA) interest rate decision may do little to prop up the exchange rate as the central bank is anticipated to retain the current policy.

AUD/USD Susceptible to Failed Test of 50-Day SMA

AUD/USD attempts to retrace the decline from the May high (0.6818) after registering a fresh yearly low (0.6459) last week, and the opening range for June may set the stage for larger recovery if the exchange rate manages to hold above the monthly low (0.6485).

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Australia Economic Calendar 06052023 Economic Calendar

However, the RBA meeting may drag on AUD/USD as the central bank is expected to keep the Official Cash Rate (OCR) at 3.85% in June, and it remains to be seen if Governor Philip Lowe and Co. will endorse a wait-and-see approach over the coming months as the Board plans to follow a ‘narrow path on which inflation comes down steadily and the unemployment rate increases but remains below pre-pandemic levels.’

In turn, AUD/USD may broadly track the negative slope in the 50-Day SMA (0.6663) as the RBA seems to be at or nearing the end of its hiking-cycle, but the central bank may take additional steps to combat inflation as ‘inflation was not expected to reach the top of the target band until mid-2025.’

ASX RBA Rate Indicator 06052023

Source: ASX

As a result, another unexpected rate hike may generate a bullish reaction in the Australian Dollar as the ASX RBA Rate Indicator shows a greater than 60% probability for ‘No Change,’ and AUD/USD may attempt to further retrace the decline from the May high (0.6818) if Governor Lowe and Co. keep the door open to implement higher interest rates.

With that said, AUD/USD may try to trade back above the 50-Day SMA (0.6663) as long as it holds above the monthly low (0.6485), but the exchange rate may track the negative in the moving average if it struggles to push above the indicator.

Australian Dollar Price Chart – AUD/USD Daily

AUDUSD Daily Chart 06052023

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

  • AUD/USD stages a three-day advance after trading to a fresh yearly low (0.6459) at the end of May, and the exchange rate may trade back above the 50-Day SMA (0.6663) as it looks poised for another close above the 0.6600 (23.6% Fibonacci retracement) handle.
  • A break/close above 0.6660 (50% Fibonacci retracement) raises the scope for a move towards the 0.6780 (38.2% Fibonacci retracement) to 0.6820 (23.6% Fibonacci retracement) region, but AUD/USD may track the negative slope in the moving average if it fails to push back above the indicator.
  • A close below the 0.6600 (23.6% Fibonacci retracement) handle may push AUD/USD back towards the 0.6510 (38.2% Fibonacci retracement) to 0.6550 (61.8% Fibonacci retracement) area, with the next region of interest coming in around the May low (0.6459).

Additional Market Outlooks

USD/JPY Post-NFP Rebound Puts June Opening Range in Focus

Gold Price Rebound Brings Test of 50-Day SMA

--- Written by David Song, Strategist

Follow me on Twitter at @DavidJSong

Related tags: AUD USD David Song

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