Other developments remain on the table

• AUD/USD regained traction and breached the 0.6900 barrier.
• The dollar traded in an inconclusive fashion after Wednesday’s rally.
• China’s Politburo reinforced the previous stimulus announced by the PBoC.

AUD/USD and the wider risk complex regained its smile and shrugged off Wednesday’s sharp pullback, retrieving the 0.6900 barrier and beyond and flirting with Thursday’s YTD highs again.

The pair’s robust recovery came in response to news that China’s Politburo pledged to increase benefits for the poorest and provide local governments with the necessary funds to prevent further house price falls. The move follows the PBoC’s stimulus efforts to revive the housing sector and boost the stock market, as well as a focus on stabilizing the housing market and improving the consumer environment.

In line with the Australian dollar’s rise, copper prices rose to levels last traded in July near the $4.70 an ounce region, while iron ore prices extended their consolidation move below the $94 level per ton.

Additional support for the pair came from indecisive price action around the greenback following Wednesday’s strong move higher.

On September 24, the Reserve Bank of Australia (RBA) decided to keep interest rates at 4.35%, as expected. The bank kept its stance neutral, saying: “The board is not deciding anything in or out”, while warning that “it will be some time before inflation is sustainably within the target range” and stressing the need to remain alert to potential inflation. risks.

However, during the press conference after the meeting, Gov. Michele Bullock tempered the demanding rhetoric, indicating that the Board “has not explicitly considered a rate increase this time.”

Investors currently see a roughly 55% chance that the key interest rate will be cut by 25 basis points by the end of the year.

Recently, the RBA’s monthly CPI gauge reported a rise of 2.7% in August, down from 3.5%. Governor Bullock noted that this version is “quite volatile” and does not include all items, unlike quarterly CPI data. The RBA also reiterated its expectation that inflation will not “sustainably” return to its target range of 2-3% until 2026.

In addition, the RBA could be among the last G10 central banks to start cutting rates. It is expected to enter the global easing cycle later this year given weak underlying economic activity, which points to lower inflationary pressures.

Looking ahead, with the Federal Reserve’s expected rate cuts largely priced in and the RBA set to maintain a tight policy for some time, AUD/USD could see further gains later this year. However, significant uncertainty remains regarding the Chinese economy and the actual implementation of recently announced stimulus measures.

AUD/USD Daily Chart

AUD/USD Short-Term Technical Outlook

Further gains should prompt AUD/USD to challenge its 2024 high of 0.6908 (September 25) before hitting the important 0.7000 threshold.

Bears, on the other hand, could initially drive the pair to the September low of 0.6622 (September 11), a region supported by the important 200-day SMA, all ahead of the 2024 low of 0.6347 (August 5). .

The four-hour chart shows increasing bullish momentum. Having said that, the initial resistance is 0.6908 which comes before 0.6920 and 0.7024. On the downside, initial support is at 0.6817 ahead of the 55-SMA at 0.6804 and the 100-SMA at 0.6753. The RSI rose above the 61 level.