30 Oct 2024

• AUD/USD rebounds around 50 pips from a nearly two-month low touched this Wednesday.
• The technical setup warrants caution before confirming a near-term bottom for the major.
• Traders now look forward to important US macro releases to grab short-term opportunities.
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The AUD/USD pair has demonstrated a notable intraday recovery from its lowest point since August 8, which was approximately in the 0.6535 range reached earlier on Wednesday. Currently, it appears to have broken a three-day losing streak. During the initial part of the European session, spot prices have risen to a new daily high, around the 0.6685 level, aided by a slight decline in the US Dollar (USD). However, a significant upward movement still seems out of reach.

The USD Index (DXY), which measures the performance of the Greenback against a selection of currencies, continues to retreat from a three-month high, coinciding with a further drop in US Treasury bond yields. Additionally, the recent Australian consumer inflation data released today has diminished expectations for an interest rate reduction by the Reserve Bank of Australia (RBA) before the end of the year. This development supports the Australian Dollar (AUD) and plays a role in the intraday rebound of the AUD/USD pair.

That said, firming expectations for a less aggressive policy easing by the  (Fed), along with a generally weaker tone around the equity markets, should act as a tailwind for the safe-haven buck and cap the risk-sensitive Aussie. Traders might also refrain from placing aggressive directional bets ahead of important US macro releases. This makes it prudent to wait for strong follow-through buying before confirming that the AUD/USD pair has formed a near-term bottom.

From a technical perspective, the recent breakdown below the very important 200-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that any subsequent recovery beyond the 0.6600 mark might still be seen as a selling opportunity and remain capped near the 0.6630 area, or the 200-day SMA breakpoint. 

The latter should act as a key pivotal point, which if cleared decisively could trigger a fresh bout of a short-covering rally and lift the AUD/USD pair to the 0.6675 intermediate hurdle en route to the 0.6700 round figure.

On the flip side, the daily swing low, around the 0.6535 area could offer some support ahead of the 0.6500 psychological mark. Some follow-through selling should pave the way for a further depreciating move towards the 0.6440-0.6435 support zone. The AUD/USD pair could eventually drop to the 0.6400 round figure and the next relevant support near the 0.6370 region.