Australian Dollar Outlook: AUD/USD Rebound Eyes Downtrend Resistance Ahead of Fed

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

• AUD/USD has rebounded nearly 1.6% from the monthly lows after rebounding off trend support
• The recovery is now building toward downtrend resistance with the weekly opening range in view- reaction could determine the next move
• A break above resistance would strengthen the case for a larger reversal while failure would threaten resumption of the broader decline
• RBA held rates as expected (non-event)- focus now shifts to tomorrow’s Fed decision
• Resistance 7093, 7130s (key), 7164- Support 7044, 7003 (key), 6913/43

AUD/USD has rebounded sharply after defending trend support at the monthly lows, with the recovery stalling ahead of major event risk. The advance now brings a key downtrend resistance zone into focus, where the broader bearish structure will face its first meaningful challenge since the May selloff began. With the Federal Reserve rate decision on tap tomorrow and the RBA largely taking a back seat after holding rates unchanged, traders are looking to the Fed as the potential catalyst for the next directional move. 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 trading just above the median line support and that, “From a trading standpoint, rallies would need to be limited to 7214 IF price is heading lower on this stretch with close below 7108 needed to fuel the next leg of the decline.” Aussie registered an intraday high at 7201 into the close of the month before reversing sharply lower with the decline extending more than 3% off the late-May high.

An outside-day reversal off channel support last week has rallied nearly 1.6% off the monthly low with the weekly opening-range taking shape just below near-term resistance. Look for the breakout to offer guidance in the days ahead with the highly anticipated Fed rate decision on tap tomorrow.

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 continuing to trade within the confines of a descending pitchfork extending off the highs with the 75% parallel highlighting near-term resistance at the 38.2% retracement of the May decline at 7093. Subsequent resistance is eyed with the upper parallel (currently near 7130s) with bearish invalidation now lowered to 61.8% retracement at 7164. Strength beyond this threshold would suggest a more significant low is in place and a larger reversal is underway.

Weekly open support rests at 7044- a break of the weekly opening range would expose subsequent objectives at the 100% extension of the May decline and the 61.8% retracement of the late-March rally at 7003 with key support steady at 6913/43- a region defined by the 2021 high-day close / high and converges on both near-term downtrend support, and longer-term uptrend support. This represents an area of interest for possible exhaustion / price inflection- look for a larger reaction there IF reached.

 

Bottom line: Aussie rebounded off trend support last week with the recovery now approaching downtrend resistance ahead of the Fed tomorrow. From a trading standpoint, rallies would need to be limited to the upper parallel (7130s) IF price is heading lower on this stretch with a close below the 70-handle needed to fuel the next leg of the decline.

Beyond the policy decision itself, markets will be closely focused on the Federal Reserve’s updated Summary of Economic Projections (SEP), which will provide fresh guidance on growth, employment, inflation, and the expected path of interest rates. This marks Kevin Warsh's first meeting as Fed Chair, adding another layer of significance to the event. With reports of progress toward an Iran agreement helping to ease concerns over energy prices, investors will be looking for clues on how policymakers assess the inflation outlook and its implications for monetary policy. Current market pricing implies roughly a 55% probability of at least one Fed rate hike by year-end. Stay nimble into the monthly cross and watch the weekly close for guidance here. 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