AUD/USD Faces Further Downside Amid Growing Bearish Pressure

The Australian dollar continued to face increased selling pressure against the U.S. dollar on Monday, extending its three-week decline as market sentiment adjusted expectations for interest rate cuts. During early European trading, the AUD/USD pair struggled as the Federal Reserve’s steadfast rate policy reinforced the dollar’s strength, limiting risk appetite. Although Australia’s labor market has shown resilience, and interest rates are not expected to fall before April next year, the short-term market environment remains challenging for the Aussie.

Market participants have adjusted their stance on the Fed’s interest rate trajectory, leading to a bullish backdrop for the dollar. This shift has caused the Australian dollar to weaken despite relatively strong fundamentals in the domestic economy, as the Fed’s cautious tone has elevated demand for the greenback as a safer bet.

Technical Analysis

On the hourly chart, the AUD/USD pair is facing notable selling pressure within the upper Bollinger band. The sellers are attempting to break below the 0.66975 level, a move that would complete a double-top pattern, signaling a potential continuation of the bearish trend. A confirmed break below this level would likely drag the price down to the mid-Bollinger band, targeting 0.66906 as the immediate support level.

If bearish momentum persists, traders will shift their attention to lower support levels at 0.66817, followed by 0.66720 and ultimately 0.66562. These levels represent key downside targets where buyers might step in to defend against further declines. The Relative Strength Index (RSI) remains neutral, hovering around the midpoint, which indicates a lack of a clear directional bias but leans towards a bearish outlook given recent price action. The MACD currently presents mixed signals, while the moving averages indicate a downward trend, adding to the overall negative sentiment.

Alternative Scenario

If buyers regain control, breaking above the 0.67230 resistance would invalidate the current bearish scenario. Such a move could lead to a reversal, prompting further gains for the Australian dollar as the pair finds stability above this key resistance level.

Key Levels Overview

Resistance Levels:

• Resistance 1: 0.67230

Current Price: 0.66976

Support Levels:

• Support 1: 0.66906
• Support 2: 0.66817
• Support 3: 0.66562

Key Events to Watch

With a light economic calendar on Monday, traders will focus on a speech by Neel Kashkari, a Federal Reserve official, which could provide insights into future monetary policy. Any unexpected hawkish or dovish comments could introduce volatility in the AUD/USD pair, influencing short-term price direction.

Conclusion

The AUD/USD remains under pressure as sellers eye a break below key support at 0.66975 to confirm further declines. A successful breakdown could lead to targets around 0.66817 and 0.66562, while a reversal above 0.67230 would be needed to negate the bearish outlook. Market participants should watch the upcoming commentary from the Federal Reserve for cues on potential shifts in monetary policy that could impact the pair’s trajectory.

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