Australian Dollar Price Forecast: No changes to the range-bound theme
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UPGRADE- AUD/USD faded Wednesday’s gains and broke below 0.6600 once again.
- The US Dollar advanced further on the back of the persistent risk-off trend.
- Australia’s Consumer Inflation Expectations rose to 4.8% in October.
The Australian Dollar (AUD) lost traction on Thursday, weighed down by the persistent recovery of the US Dollar (USD). That said, spot broke back below the key 0.6600 level, reflecting a renewed push higher in the US Dollar Index (DXY), which climbed to fresh two-month highs above 99.00.
Australia’s economy still showing some backbone
Despite the softer market mood, the domestic picture in Australia remains fairly resilient. September’s final manufacturing and services PMIs both eased a touch but stayed above 50, still pointing to ongoing expansion.
In addition, Retail Sales rose 1.2% in June, the August trade surplus narrowed only slightly to A$1.825 billion, and business investment continued to climb through Q2. Furthermore, the GDP grew 0.6% in the second quarter and 1.8% YoY, hardly stellar, but solid enough.
However, the labour market has lost a bit of steam. The jobless rate held at 4.2% in August, but total employment dipped by 5.4K individuals. It’s not alarming, though it does suggest that the pace of growth is softening around the edges.
RBA still on alert over inflation
Inflation remains the key concern for the Reserve Bank of Australia (RBA). The August Monthly CPI Indicator (Weighted Mean) ticked up to 3.0% from 2.8%, while Q2 CPI rose 0.7% QoQ and 2.1% YoY. The Melbourne Institute’s October Consumer Inflation Expectations also climbed to 4.8%.
That was enough to keep the RBA cautious at its 30 September meeting. The cash rate was held at 3.60%, as expected, but officials dialled back earlier hints of potential easing. Policymakers flagged that disinflation might be slowing after the recent CPI surprise, with Q3 inflation likely to print hotter than the 2.6% forecast.
Governor Michele Bullock has kept the Bank’s message consistent: decisions will remain data-driven and taken one meeting at a time. Rate cuts aren’t off the table, but the RBA wants more convincing evidence that supply-demand pressures are easing.
For now, the trimmed mean CPI at 2.7% YoY in Q2 sits comfortably within the RBA’s 2–3% target band. Markets are pricing in about 15 basis points of easing by year-end and roughly 28 basis points by late 2026.
China still calling the tune
Australia’s fortunes remain closely tied to China’s patchy recovery: The Q2 GDP expanded by 5.2% YoY, but August retail sales underwhelmed at 3.4%. In addition, the September PMIs told a mixed story as manufacturing stayed in contraction at 49.8, while services only held the 50.0 threshold. Still in China, August inflation showed the CPI drop 0.4% YoY, keeping deflation worries well and sound.
Additionally, the People’s Bank of China (PBoC) kept its Loan Prime Rates (LPR) unchanged in September: the one-year at 3.00% and the five-year at 3.50%, matching consensus.
Traders staying cautious
Speculative interest in the Aussie remains thin. With the latest Commodity Futures Trading Commission (CFTC) data delayed by the US government shutdown, the most recent figures to September 23 showed net shorts climbing to two-week highs near 101.6K contracts, while open interest edged up to 160.8K.
Technical levels to watch
AUD/USD appears somewhat stabilised around the 0.6600 region for now.
Against that, any bullish attempt in the pair should initially retarget the 2025 peak at 0.6707 (September 17), ahead of the 2024 top at 0.6942 (September 30), and the relevant 0.7000 threshold.
Conversely, the interim 55-day and 100-day SMAs at 0.6545 and 0.6531, respectively, should offer temporary contention, just ahead of the weekly floor at 0.6520 (September 26). Down from here, the pair could revisit the August trough at 0.6414 (August 21), reinforced by the key 200-day SMA, and then the June valley at 0.6372 (June 23).
Momentum indicators lean bearish now: the Relative Strength Index (RSI) has eased to around 47, indicating that sellers could be reasserting control, while the Average Directional Index (ADX) near 15 suggests the current trend remains juiceless.
AUD/USD daily chart
Waiting for a catalyst
All told, AUD/USD remains stuck in a broad 0.6400–0.6700 range. It’ll likely take a stronger catalyst, better data out of China, a dovish shift from the Fed, or a more cautious RBA, to push the pair decisively one way or the other.
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 faded Wednesday’s gains and broke below 0.6600 once again.
- The US Dollar advanced further on the back of the persistent risk-off trend.
- Australia’s Consumer Inflation Expectations rose to 4.8% in October.
The Australian Dollar (AUD) lost traction on Thursday, weighed down by the persistent recovery of the US Dollar (USD). That said, spot broke back below the key 0.6600 level, reflecting a renewed push higher in the US Dollar Index (DXY), which climbed to fresh two-month highs above 99.00.
Australia’s economy still showing some backbone
Despite the softer market mood, the domestic picture in Australia remains fairly resilient. September’s final manufacturing and services PMIs both eased a touch but stayed above 50, still pointing to ongoing expansion.
In addition, Retail Sales rose 1.2% in June, the August trade surplus narrowed only slightly to A$1.825 billion, and business investment continued to climb through Q2. Furthermore, the GDP grew 0.6% in the second quarter and 1.8% YoY, hardly stellar, but solid enough.
However, the labour market has lost a bit of steam. The jobless rate held at 4.2% in August, but total employment dipped by 5.4K individuals. It’s not alarming, though it does suggest that the pace of growth is softening around the edges.
RBA still on alert over inflation
Inflation remains the key concern for the Reserve Bank of Australia (RBA). The August Monthly CPI Indicator (Weighted Mean) ticked up to 3.0% from 2.8%, while Q2 CPI rose 0.7% QoQ and 2.1% YoY. The Melbourne Institute’s October Consumer Inflation Expectations also climbed to 4.8%.
That was enough to keep the RBA cautious at its 30 September meeting. The cash rate was held at 3.60%, as expected, but officials dialled back earlier hints of potential easing. Policymakers flagged that disinflation might be slowing after the recent CPI surprise, with Q3 inflation likely to print hotter than the 2.6% forecast.
Governor Michele Bullock has kept the Bank’s message consistent: decisions will remain data-driven and taken one meeting at a time. Rate cuts aren’t off the table, but the RBA wants more convincing evidence that supply-demand pressures are easing.
For now, the trimmed mean CPI at 2.7% YoY in Q2 sits comfortably within the RBA’s 2–3% target band. Markets are pricing in about 15 basis points of easing by year-end and roughly 28 basis points by late 2026.
China still calling the tune
Australia’s fortunes remain closely tied to China’s patchy recovery: The Q2 GDP expanded by 5.2% YoY, but August retail sales underwhelmed at 3.4%. In addition, the September PMIs told a mixed story as manufacturing stayed in contraction at 49.8, while services only held the 50.0 threshold. Still in China, August inflation showed the CPI drop 0.4% YoY, keeping deflation worries well and sound.
Additionally, the People’s Bank of China (PBoC) kept its Loan Prime Rates (LPR) unchanged in September: the one-year at 3.00% and the five-year at 3.50%, matching consensus.
Traders staying cautious
Speculative interest in the Aussie remains thin. With the latest Commodity Futures Trading Commission (CFTC) data delayed by the US government shutdown, the most recent figures to September 23 showed net shorts climbing to two-week highs near 101.6K contracts, while open interest edged up to 160.8K.
Technical levels to watch
AUD/USD appears somewhat stabilised around the 0.6600 region for now.
Against that, any bullish attempt in the pair should initially retarget the 2025 peak at 0.6707 (September 17), ahead of the 2024 top at 0.6942 (September 30), and the relevant 0.7000 threshold.
Conversely, the interim 55-day and 100-day SMAs at 0.6545 and 0.6531, respectively, should offer temporary contention, just ahead of the weekly floor at 0.6520 (September 26). Down from here, the pair could revisit the August trough at 0.6414 (August 21), reinforced by the key 200-day SMA, and then the June valley at 0.6372 (June 23).
Momentum indicators lean bearish now: the Relative Strength Index (RSI) has eased to around 47, indicating that sellers could be reasserting control, while the Average Directional Index (ADX) near 15 suggests the current trend remains juiceless.
AUD/USD daily chart
Waiting for a catalyst
All told, AUD/USD remains stuck in a broad 0.6400–0.6700 range. It’ll likely take a stronger catalyst, better data out of China, a dovish shift from the Fed, or a more cautious RBA, to push the pair decisively one way or the other.
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.
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