The next target comes at 0.7000

• AUD/USD advanced further and made new 2024 highs around 0.6940.
• Chinese stimulus continued to support the Australian dollar.
• Business activity in China disappointed market expectations in September.

AUD/USD, along with most of the risk asset complex, extended its march north earlier in the week, climbing up to the 0.6940-0.6945 band to print new 2024 highs.

This strong recovery was driven by the recently announced stimulus package aimed at kick-starting the long-awaited recovery of the Chinese economy from the COVID pandemic.

On a direct impact of Chinese stimulus measures and in tandem with the Australian dollar’s upward movement, copper prices rose to levels last seen in July, approaching $4.70 an ounce, while iron ore prices they jumped to the $115 per metric ton range for the first time. time since June. This strong rally in commodity prices, however, faded towards the end of the day.

In addition, the pair’s rise managed to bypass the US dollar’s promising start to the new trading week.

On the monetary policy front, the Reserve Bank of Australia (RBA) kept interest rates steady at 4.35% at its September 24 meeting, as expected, maintaining a neutral stance. The bank stressed that it was “not ruling anything out” but warned that “it will be some time before inflation is sustainably within the target range”, stressing the need to remain vigilant to potential inflation risks.

However, during the post-meeting news conference, Gov. Michele Bullock toned down the driver’s tone, noting that the Council “did not explicitly consider a rate increase this time.”

Markets are currently pricing in a 55% probability of a 25 basis point rate cut by the end of the year.

Moreover, the RBA is likely to be among the last G10 central banks to start cutting interest rates, with expectations that it will join the global easing cycle later this year on weak underlying economic activity that is expected to reduce pressures inflationary.

Looking ahead, with Federal Reserve interest rate cuts expected and the RBA likely to maintain its restrictive stance for some time, AUD/USD could see further gains later this year. However, uncertainty remains regarding the Chinese economy and the actual implementation of recently announced stimulus measures.

News from the CFTC positioning report showed speculative net shorting in AUD fell to three-week lows around 11.2k contracts amid a modest increase in open interest for the week ending September 24. Greenback and expectations of a cautious message from the RBA at its meeting.

AUD/USD Daily Chart

AUD/USD Short-Term Technical Outlook

Further gains should prompt AUD/USD to test its 2024 high of 0.6941 (30 September) before reaching the critical 0.7000 level.

Bears, on the other hand, could initially drive the pair to the September low of 0.6622 (September 11), which is supported by the key 200-day SMA (0.6626), all before the point of down from 2024 of 0.6347 (August 5).

The four-hour chart shows firm upward momentum. That said, the initial resistance is 0.6941, which precedes 0.7024. On the downside, the first support is around 0.6867, ahead of the 55-SMA at 0.6842 and 0.6817. The RSI rose above the 65 level.