AUD/USD Price Forecast: Softens below 0.6800, maintaining bearish technical outlook

The AUD/USD pair has continued its decline, dipping near 0.6785 early on Friday. A potential half-point Federal Reserve rate hike has provided some support for the US Dollar against the Australian Dollar. Traders are awaiting the US October Producer Price Index report later in the day. After President Trump's statement that Washington does not require a deal with Iran, US Treasury yields increased in the previous session due to speculation of a larger-than-usual Fed rate increase next month.

Fed Governor Christopher Waller suggested that a 50-basis-point rate hike should be considered if core inflation remains high. Currently, traders believe there is an 85.5% chance of a US rate hike during the Fed meeting on December 8-9, with a 14.5% probability of a half-point increase, according to the CME FedWatch tool. If there is a sharp sell-off in equity markets, it could negatively impact the US Dollar.

Carol Kong, a currency strategist at Commonwealth Bank of Australia, believes the AUD/USD could maintain its strong momentum in the near term, especially with Fed officials speaking next week. The release of the RBA meeting minutes and the FOMC minutes next week is expected to provide clearer signals on future rate paths. Analysts at Rabobank noted that November inflation expectations in Australia remained at 5.3%, more than double the RBA's midpoint target, indicating ongoing price pressures well above the central bank's desired level.