AUD/USD has been trading in a narrow range around 0.7020, with price action described as quiet but with a mild downside tilt. The pair previously moved between 0.7001 and 0.7042, ending at 0.7016, up 0.03%, and then traded between 0.6990 and 0.7024 to close at 0.7017, up 0.02%. Resistance is seen at 0.7020 and 0.7030, while major support sits at 0.6980; any near-term decline is not expected to reach that level.
Over a one- to three-week horizon, the outlook remains negative, with the pair expected to gravitate towards the month-to-date low near 0.6980. The downside scenario is conditioned on 0.7045 holding as a ceiling, a level described as strong resistance and revised from 0.7060. The earlier reference point for the stance change was 18 June, when spot was at 0.7025.
Bearish Technical View And Resistance Levels
We are keeping our negative view on the AUD/USD, expecting it to trade with a downward bias. The price action has been quiet, but we see a gradual move towards the month-to-date low near 0.6980. Our bearish outlook holds as long as the pair does not break above the 0.7045 resistance level.
Macro Drivers: Fed, RBA, China, And Commodities
This perspective is supported by recent US economic data and Federal Reserve communications. The Fed’s latest meeting minutes reaffirmed a commitment to keeping interest rates elevated to manage inflation, which keeps the US dollar strong. This policy divergence with the Reserve Bank of Australia, which has signaled a pause, should continue to weigh on the pair.
On the Australian side, recent inflation figures for the last quarter eased to 3.2%, slightly below forecasts and reinforcing the case for the RBA to remain on hold. We are also seeing external pressure from slowing industrial production in China, Australia’s largest trading partner. This weakens the outlook for Australian commodity exports.
Iron ore prices, a critical driver for the Australian dollar, have also reflected this concern by dipping below $100 per tonne. Historically, sustained periods of weak iron ore prices have been correlated with a lower AUD/USD exchange rate. This adds another layer of credibility to our forecast for a weaker Aussie.
Given the lacklustre downward momentum, we don’t anticipate a sharp drop. For derivative traders, this environment favors strategies that profit from a slow grind lower or range-bound trading. Selling out-of-the-money call spreads with strike prices above the 0.7045 resistance level could be an appropriate strategy to consider.
