AUD/USD Price Forecast: Bearish Technical Outlook Persists as Pair Slips Below 0.6800

Selling pressure takes AUD/USD towards 0.6785 as Friday’s European session gets under way.
A large Fed rate increase at the December meeting carries a 14.5% probability in market pricing, according to the CME FedWatch tool.
With the price remaining below the 100-day SMA, the pair’s near-term bias stays bearish.
On the upside, 0.6800 is the nearest resistance to monitor, while 0.6668 is the initial downside objective.

Selling pressure continues to weigh on AUD/USD, taking the pair towards 0.6785 in early European trade on Friday. The US Dollar (USD) draws some support against the Australian Dollar (AUD) from rising expectations of a half-point interest rate increase by the Federal Reserve (Fed). Attention now turns to the US October Producer Price Index (PPI) report, scheduled for release later on Friday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The previous session saw US Treasury yields climb following President Donald Trump’s statement that Washington does not need a deal with Iran. Traders were assessing the prospect of a larger-than-usual Fed rate hike next month.

Meanwhile, a 50-basis-point increase should be considered if core inflation stays high, Fed Governor Christopher Waller said.

For the Fed’s next meeting on December 8-9, traders now assign a nearly 85.5% probability to a US rate increase, with the likelihood of a half-point hike at 14.5%, according to the CME FedWatch tool.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said: "If we do see a further sharp selloff in equity markets, that could be a negative for the US Dollar,"

Carol added: “But I think there's a possibility it can continue its strong momentum in the near term, particularly with Fed officials speaking next week. If we see further support for a 50-basis-point hike, there's further upside in the Dollar too,”

Next week’s key releases will be the RBA meeting minutes and the FOMC minutes, which could provide a clearer indication of the future path of interest rates.

Why do Australian inflation expectations remain well above the RBA target?

Price pressures remain persistently above the central bank’s preferred level, analysts at Rabobank point out. They note that Australian inflation expectations for November “stayed at 5.3%, so over double the RBA’s mid-point target,” highlighting the continued gap.

What does Williams’s inflation warning mean for a resilient US economy?

A score of 7/10 on the FXS Speechtracker placed the speech by the Fed’s Williams modestly above the historical average of 6.1/10, suggesting a slightly more impactful tone than the established baseline. His description of the US economy as “resilient” and “robust” was accompanied by a warning that inflation remains “stubbornly persistent and elevated,” conveying that the central bank’s task is not complete. Bringing inflation back to 2% will require action over time. The speech also drew a clear distinction between targeting the inflation rate and trying to lower the overall price level at the cost of weak economic conditions.

Despite staying well within hawkish territory and far above the neutral 100 mark, the FXS Fed Sentiment Index eased 0.08 points to 147.47, pointing to a small decline in perceived hawkishness. The reading suggests that broader Fed communication retains a firm anti-inflation stance even as sentiment softens marginally, although the speech’s tone was somewhat stronger than the FXS Speechtracker’s established baseline.

Technical Analysis: Can AUD/USD shake off its bearish bias below key resistance levels?

Downward pressure remains evident on the daily chart, where AUD/USD continues to retreat below both the 20-day and 100-day simple moving averages. These averages are keeping a firm lid on the pair and sustaining its bearish near-term bias. The price is now marginally below the lower Bollinger Band, while the Relative Strength Index (14), at 31.9, is close to oversold territory. Together, these signals suggest selling momentum is stretched, but a decisive reversal has yet to emerge.

Any recovery would first encounter resistance around 0.6800 at the lower Bollinger Band, before the Bollinger Bands’ midline near 0.6960 and the psychological 0.7000 mark come into focus. Further up, the 100-day SMA at 0.7025 presents a stronger hurdle. The upper Bollinger Band near 0.7120 defines a higher resistance area that the pair would need to regain to weaken the broader bearish structure.

Initial support lies at 0.6668, the low recorded on 19 January. Sustained selling below that threshold could bring the 18 December 2025 low of 0.6592 into view, ahead of the 5 November 2025 low of 0.6458.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Australian Dollar: Frequently asked questions

Which factors have the greatest influence on the Australian Dollar?

Interest rates set by the Reserve Bank of Australia (RBA) are among the strongest influences on the Australian Dollar (AUD). Australia’s abundance of natural resources also makes the price of iron ore, its largest export, an important driver. Other considerations include the state of China’s economy, as China is Australia’s biggest trading partner, along with domestic inflation, economic growth and the trade balance. Investor appetite for risk matters too: a shift towards riskier assets (risk-on) generally supports the AUD, while a preference for safe havens reflects a risk-off mood.

How can Reserve Bank of Australia policy move the Australian Dollar?

By setting the interest rate at which Australian banks can lend to one another, the Reserve Bank of Australia (RBA) affects borrowing costs across the economy and, in turn, the Australian Dollar (AUD). Adjusting rates upwards or downwards is its main means of keeping inflation stable at 2-3%. When its rates are relatively high compared with those of other major central banks, the AUD receives support; relatively low rates have the reverse effect. To alter credit conditions, the RBA can also employ quantitative easing or quantitative tightening. Easing is negative for the AUD, whereas tightening is positive.

Why does China’s economic performance matter for the Australian Dollar?

As Australia’s biggest trading partner, China has a substantial influence on the Australian Dollar (AUD). A strong Chinese economy buys more Australian raw materials, goods and services, increasing demand for the AUD and lifting its value. When Chinese growth falls short of expectations, the reverse applies. This is why upside or downside surprises in China’s growth figures often feed directly into movements in the Australian Dollar and its currency pairs.

Why do iron ore prices influence the Australian Dollar?

According to 2021 data, iron ore is Australia’s biggest export, worth $118 billion annually, and China is its main destination. Changes in its price can therefore move the Australian Dollar. A rise in iron ore prices typically increases aggregate demand for the currency, lifting the AUD; a fall usually has the opposite effect. Higher prices also make a positive Australian trade balance more likely, providing another source of support for the AUD.

How can the trade balance affect the Australian Dollar’s value?

Another influence on the Australian Dollar is the trade balance, which measures export earnings against spending on imports. Strong overseas demand for Australian exports can raise the currency’s value because the demand generated by foreign buyers exceeds Australia’s spending on imported goods. A positive net trade balance therefore supports the AUD, while a negative balance has the reverse effect.