AUD/USD Price Forecast: Positive momentum points to further upside
- AUD/USD maintains a bullish bias as it holds above the key daily moving averages.
- The RSI and MACD indicators point to firm but not overextended upside momentum.
- The 0.7150-0.7200 region forms a strong resistance zone ahead of the yearly peak.
AUD/USD holds firm near a two-and-a-half-month high on Wednesday, supported by broad US Dollar (USD) weakness, while technical indicators point to further upside. At the time of writing, the pair trades around 0.7118, up 0.43% on the day, after reaching an intraday high of 0.7129.
The US Dollar Index (DXY), which gauges the Greenback's value against a basket of six major currencies, trades near 98.90, down 0.75% on the day and touching its lowest level since May 29.
Strategists at Rabobank "continue to see scope for a shallow uptrend in AUD/USD into next year," with the move higher expected to be "aided by November RBA rate hike risk" and underpinned by Rabobank’s call that "the Fed will avoid tightening policy this year."
Australia’s employment report, due on Thursday, could provide fresh direction for the pair. The economy is expected to add 15K jobs in July, following a gain of 76.3K in June, while the Unemployment Rate is forecast to stay unchanged at 4.4%.
Technical Analysis
AUD/USD maintains a bullish near-term bias as spot holds above the 21-, 50-, 100- and 200-day Simple Moving Averages (SMAs) clustered between roughly 0.6946 and 0.7065.
The Relative Strength Index (RSI) on the daily chart is near 65, suggesting firm but not extreme upside momentum, while the Moving Average Convergence Divergence (MACD) indicator remains slightly positive, hinting that buyers still control the short-term tone as the pair edges towards overhead resistance.
On the topside, the 0.7150-0.7200 region forms a strong resistance zone. A clear break above this area could open the door to a retest of this year’s peak near 0.7270.
On the downside, immediate support is seen at the recent close around 0.7118, followed by the 100-day SMA at 0.7065 and the 21-day SMA at 0.7036, before deeper demand is expected around the 50-day SMA at 0.6996 and the longer-term 200-day SMA at 0.6946.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
