AUD/USD Price Forecast: Extra Gains Likely Amid Cautious RBA Stance
The Australian Dollar's price forecast is looking positive, with extra gains likely. The AUD/USD pair has been maintaining a neutral-to-bullish stance as long as it remains above the 200-day SMA around 0.6940.
However, the pair is approaching the overbought zone, which could trigger a technical correction. Australia's solid domestic fundamentals and the RBA's cautious stance should discourage aggressive selling, while persistent demand for the US Dollar and geopolitical uncertainty may prevent an immediate breakout.
The RBA has left its Official Cash Rate unchanged at 4.35%, delivering another cautious message. Governor Michele Bullock stated that another rate hike is still possible if inflation proves more persistent than expected.
Market participants expect just over 15 basis points of tightening by year-end, while consensus expects the central bank to keep its hand steady at its September 29 meeting. The Australian economy has been relatively healthy, supported by firm demand, positive growth, and a resilient labor market. However, slower economic growth and less tightness in the labor market are needed to bring inflation back to goal in a sustainable manner.
The AUD/USD pair's speculative sentiment weakened again, with net shorts widening to around 39.2K contracts. The renewed deterioration came alongside a sizeable increase in participation, suggesting bearish positions are being added rather than the move being driven by the liquidation of existing longs.