AUD/USD Forecast: Looking at 0.6600 and below

AUD/USD Current Price: 0.6614

• Australian Dollar fails to hold to gains, affected by risk aversion. 
• US Dollar rises across the board, with mixed US data; attention turns to FOMC minutes. 
• The AUD/USD pair holds a bearish bias, with focus on the 0.6600 zone.

During Tuesday's European session, the AUD/USD pair broke below the support area of 0.6635/40 and fell to 0.6610 before consolidating losses. However, the slide found support above 0.6600. The combination of a stronger US dollar and deteriorating risk sentiment weighed on the Australian dollar, which was unable to capitalize on a rebound in commodity prices during the American session.

Economic data from Australia showed a smaller-than-expected decline in the S&P Global Services PMI in May, dropping from 53.7 to 51.8, beating market expectations of 48.9. However, the Manufacturing PMI remained unchanged at 48, and the Composite PMI fell from 53 to 51.2. The Aussie rose modestly following the release of the data. On Wednesday, the Melbourne Institute will release the Leading Index figures for April.

A key event during the Asian session that could impact the Aussie is the Reserve Bank of New Zealand (RBNZ) meeting. The central bank is expected to raise its key interest rate by 25 basis points to 5.5%, although some analysts warn that a larger hike is possible.

RBNZ Interest Rate Decision Preview: Kiwi set to fly on a hawkish rate hike

On Tuesday, the US dollar rose across the board, amid risk aversion and mixed US economic data. The US S&P Global Manufacturing PMI in May dropped from 50.2 to 48.5, below the expected 50. On the contrary, the Services PMI advanced from 53.6 to 55.1, surpassing expectations of 52.6. New Home Sales also rose in April to an annual rate of 683K, above the market consensus of 665K. On Wednesday, the US will release the minutes of the latest FOMC meeting. Market participants will also be keeping an eye on headlines regarding debt-limit negotiations.

AUD/USD short-term technical outlook

The AUD/USD pair dropped on Wednesday and it was headed towards the lowest close for the current month. The pair is approaching the 0.6600 area, which acted as resistance during last week's decline. A break below this level would expose the 2023 low at 0.6560/65. The risk remains tilted to the downside, and if the pair falls below the year-to-date low, the next support level stands around the 0.6525/30 zone.

On the 4-hour chart, the bearish pressure continues to build up in AUD/USD, indicating a test of 0.6600. However, a recovery above 0.6640 could ease the negative tone. To change the short-term bearish outlook, the Aussie needs to break a downtrend line, which is currently at 0.6655/60.

Support levels: 0.6600 0.6565 0.6530

Resistance levels:  0.6640 0.6670 0.6710

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