Australian Dollar Price Forecast: Extra gains remain in the pipeline
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get all exclusive analysis, access our analysis and get Gold and signals alerts
Elevate your trading Journey.
UPGRADE- AUD/USD added to Monday’s optimism, approaching the 0.6600 barrier.
- The US Dollar remained on the back foot ahead of the FOMC gathering.
- The release of inflation figures will be the salient event in Oz on Wednesday.
The Australian Dollar (AUD) carried Monday’s good mood into Tuesday, pushing AUD/USD closer to the key 0.6600 level, its highest in three weeks.
The extra lift came as the US Dollar (USD) lost more ground, as market participants were encouraged by signs that US–China trade tensions are easing, growing confidence that the Federal Reserve (Fed) could deliver a rate cut soon, and ongoing uncertainty over the possible US government shutdown.
Australia’s data still holding up
The Australian economy keeps showing a fair bit of resilience, not exactly booming, but certainly holding steady. The preliminary October PMI figures painted a mixed picture: manufacturing dipped slightly to 49.7 (from 51.4), while services rose to 53.1 (from 52.4).
Retail Sales were up 1.2% in June, and the August trade surplus eased only modestly to A$1.825 billion. Business investment expanded through Q2, while GDP grew 0.6% on the quarter and 1.8% on a yearly basis. Not spectacular numbers, but respectable enough.
The labour market, though, is showing early signs of cooling: the Unemployment Rate ticked up to 4.5% in September from 4.3%, and the Employment Change came in at just 14.9K. Nothing alarming yet, but it does suggest hiring momentum is losing a bit of speed.
RBA staying alert
The Reserve Bank of Australia (RBA) is keeping a close watch on inflation and jobs. Ahead of Wednesday’s inflation data, it’s worth recalling that the August Monthly CPI Indicator (Weighted Mean) rose to 3.0% from 2.8%, while Q2 CPI was up 0.7% QoQ and 2.1% YoY. Meanwhile, the Melbourne Institute’s survey showed inflation expectations jumping to 4.8% in October.
The RBA’s preferred gauge, the trimmed mean CPI, ran at 2.7% annualised in Q2, neatly within its 2–3% target band.
At its September meeting, the RBA left the Official Cash Rate (OCR) at 3.60%, as expected. But policymakers struck a slightly more cautious tone, hinting that the disinflation trend might be losing steam after the last CPI surprise, and warning that Q3 inflation could come in hotter than hoped.
Governor Michele Bullock has kept the message simple: decisions will stay “meeting by meeting” and firmly data-driven. She hasn’t ruled out rate cuts but has made it clear the board needs stronger evidence that both inflation and demand pressures are truly easing before making that move.
Speaking last Friday, Bullock noted that the upcoming inflation report could play a big role in next week’s policy decision. If core inflation rises 0.9% in Q3, well above the RBA’s 0.6% forecast, she said that would be a “material miss” the board couldn’t overlook.
She also downplayed the uptick in unemployment, saying the monthly figures often fluctuate and remain broadly in line with RBA expectations. In other words, softer labour data might not worry the bank much, but a stronger inflation print could make any talk of rate cuts harder to justify.
Markets currently price in around 16 basis points of easing by year-end, with about a 41% chance of a 25bp cut at the 4 November meeting.
China still steering the story
Australia’s outlook remains closely tied to China’s recovery. Chinese GDP grew 4.8% from a year earlier during the July-September period, while Retail Sales climbed 3.0% over the year to September. However, the PMI data told a more mixed story, with manufacturing stuck below 50 at 49.8 and services hovering right on the threshold.
In addition, China’s trade surplus narrowed from $103.33 billion to $90.45 billion in September, and the consumer price index (CPI) stayed in negative territory, down 0.3% on the year.
Earlier this month, the People’s Bank of China (PBoC) kept its Loan Prime Rates unchanged at 3.00% for the one-year and 3.50% for the five-year, exactly as markets had anticipated.
Technical outlook
The positive outlook for AUD/USD is expected to remain unchallenged as long as spot trades above its key 200-day SMA near 0.6440.
Extra gains should meet the initial hurdle at the October peak of 0.6629 (October 1), ahead of the 2025 ceiling of 0.6707 (September 17). Up from here sits the 2024 top at 0.6942 (September 30), before the 0.7000 yardstick.
The resurgence of the downside bias should face initial support at the 200-day SMA, seconded by the August floor at 0.6414 (August 21). The loss of the latter exposes a probable test of the June base of 0.6372 (June 23), prior to the 0.6000 milestone and the 2025 bottom of 0.5913 (April 9).
Momentum indicators lean bullish: the Relative Strength Index (RSI) extends its bounce past the 57 level, paving the way for extra gains, while the Average Directional Index (ADX) above 19 suggests a trend that still remains unconvincing.
AUD/USD daily chart
Waiting for a spark
For now, AUD/USD is still boxed in between 0.6400 and 0.6700, waiting for something to break the range. A stronger set of Chinese data, a dovish surprise from the Fed, or a softer tone from the RBA could finally give the pair a clearer sense of direction.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
- AUD/USD added to Monday’s optimism, approaching the 0.6600 barrier.
- The US Dollar remained on the back foot ahead of the FOMC gathering.
- The release of inflation figures will be the salient event in Oz on Wednesday.
The Australian Dollar (AUD) carried Monday’s good mood into Tuesday, pushing AUD/USD closer to the key 0.6600 level, its highest in three weeks.
The extra lift came as the US Dollar (USD) lost more ground, as market participants were encouraged by signs that US–China trade tensions are easing, growing confidence that the Federal Reserve (Fed) could deliver a rate cut soon, and ongoing uncertainty over the possible US government shutdown.
Australia’s data still holding up
The Australian economy keeps showing a fair bit of resilience, not exactly booming, but certainly holding steady. The preliminary October PMI figures painted a mixed picture: manufacturing dipped slightly to 49.7 (from 51.4), while services rose to 53.1 (from 52.4).
Retail Sales were up 1.2% in June, and the August trade surplus eased only modestly to A$1.825 billion. Business investment expanded through Q2, while GDP grew 0.6% on the quarter and 1.8% on a yearly basis. Not spectacular numbers, but respectable enough.
The labour market, though, is showing early signs of cooling: the Unemployment Rate ticked up to 4.5% in September from 4.3%, and the Employment Change came in at just 14.9K. Nothing alarming yet, but it does suggest hiring momentum is losing a bit of speed.
RBA staying alert
The Reserve Bank of Australia (RBA) is keeping a close watch on inflation and jobs. Ahead of Wednesday’s inflation data, it’s worth recalling that the August Monthly CPI Indicator (Weighted Mean) rose to 3.0% from 2.8%, while Q2 CPI was up 0.7% QoQ and 2.1% YoY. Meanwhile, the Melbourne Institute’s survey showed inflation expectations jumping to 4.8% in October.
The RBA’s preferred gauge, the trimmed mean CPI, ran at 2.7% annualised in Q2, neatly within its 2–3% target band.
At its September meeting, the RBA left the Official Cash Rate (OCR) at 3.60%, as expected. But policymakers struck a slightly more cautious tone, hinting that the disinflation trend might be losing steam after the last CPI surprise, and warning that Q3 inflation could come in hotter than hoped.
Governor Michele Bullock has kept the message simple: decisions will stay “meeting by meeting” and firmly data-driven. She hasn’t ruled out rate cuts but has made it clear the board needs stronger evidence that both inflation and demand pressures are truly easing before making that move.
Speaking last Friday, Bullock noted that the upcoming inflation report could play a big role in next week’s policy decision. If core inflation rises 0.9% in Q3, well above the RBA’s 0.6% forecast, she said that would be a “material miss” the board couldn’t overlook.
She also downplayed the uptick in unemployment, saying the monthly figures often fluctuate and remain broadly in line with RBA expectations. In other words, softer labour data might not worry the bank much, but a stronger inflation print could make any talk of rate cuts harder to justify.
Markets currently price in around 16 basis points of easing by year-end, with about a 41% chance of a 25bp cut at the 4 November meeting.
China still steering the story
Australia’s outlook remains closely tied to China’s recovery. Chinese GDP grew 4.8% from a year earlier during the July-September period, while Retail Sales climbed 3.0% over the year to September. However, the PMI data told a more mixed story, with manufacturing stuck below 50 at 49.8 and services hovering right on the threshold.
In addition, China’s trade surplus narrowed from $103.33 billion to $90.45 billion in September, and the consumer price index (CPI) stayed in negative territory, down 0.3% on the year.
Earlier this month, the People’s Bank of China (PBoC) kept its Loan Prime Rates unchanged at 3.00% for the one-year and 3.50% for the five-year, exactly as markets had anticipated.
Technical outlook
The positive outlook for AUD/USD is expected to remain unchallenged as long as spot trades above its key 200-day SMA near 0.6440.
Extra gains should meet the initial hurdle at the October peak of 0.6629 (October 1), ahead of the 2025 ceiling of 0.6707 (September 17). Up from here sits the 2024 top at 0.6942 (September 30), before the 0.7000 yardstick.
The resurgence of the downside bias should face initial support at the 200-day SMA, seconded by the August floor at 0.6414 (August 21). The loss of the latter exposes a probable test of the June base of 0.6372 (June 23), prior to the 0.6000 milestone and the 2025 bottom of 0.5913 (April 9).
Momentum indicators lean bullish: the Relative Strength Index (RSI) extends its bounce past the 57 level, paving the way for extra gains, while the Average Directional Index (ADX) above 19 suggests a trend that still remains unconvincing.
AUD/USD daily chart
Waiting for a spark
For now, AUD/USD is still boxed in between 0.6400 and 0.6700, waiting for something to break the range. A stronger set of Chinese data, a dovish surprise from the Fed, or a softer tone from the RBA could finally give the pair a clearer sense of direction.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.