Australian Dollar Price Forecast: Playing with fire
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UPGRADE- AUD/USD remains under pressure near the 0.6450 region on Monday.
- The US Dollar trades in a vacillating mood amid hopes of further Fed rate cuts.
- Investors will be closely following the inflation data in Australia on Wednesday.
The Australian Dollar (AUD) trades on the back foot in a discouraging start to the new trading week, with AUD/USD challenging its critical 200-day SMA in the 0.6450-0.6460 band following Friday’s decent uptick.
The lack of a clear direction in spot comes amid the marginal advance in the US Dollar (USD), as investors continue to digest the mixed results from the US labour market report in September and renewed hopes of a rate cut by the Federal Reserve (Fed) in the next few months.
Australia: Moving forward, but not in a hurry
Australia’s economy isn’t exactly sprinting, but it’s not losing steam either. The November preliminary PMIs told a reasonably solid story: Manufacturing lifted to 51.6 (from 49.7) and Services inched up to 52.7 (from 52.5).
Retail Sales were also respectable, rising 4.3% YoY in September, while the trade surplus widened to A$3.938 billion. Business Investment improved in Q2, which helped GDP grow 0.6% QoQ and 1.1% YoY. Nothing spectacular, but steady enough to keep the wheels turning.
The labour market added a bit more confidence. October’s Unemployment Rate slipped to 4.3%, and Employment Change bounced back with a +42.2K print, a sign that conditions might be firming again.
On inflation, and ahead of the next release on November 26, it’s worth remembering that the Monthly CPI Indicator (Weighted Mean) ticked up to 3.5% in September. The Trimmed Mean came in at 3.0% YoY and the headline CPI at 3.5%, still too hot for comfort.
China: Supporting, but not supercharging
China remains a crucial piece of the puzzle for Australia, and its recovery continues, just without much acceleration.
GDP expanded 4.0% YoY in Q3 and October Retail Sales grew 2.9% YoY. But some softness crept in elsewhere: the RatingDog Manufacturing PMI eased to 50.6 and Services slipped to 52.6. Industrial Production also disappointed, up 4.9% YoY.
Trade data told a similar story, with the surplus narrowing from $103.33 billion to $90.45 billion in September. Inflation did surprise on the upside, though: headline CPI rebounded to 0.2% YoY thanks to holiday spending, while core CPI improved to 1.2%.
As widely expected, the People’s Bank of China (PBoC) left its Loan Prime Rates (LPR) unchanged, 3.00% for the one-year and 3.50% for the five-year.
RBA: Keeping things steady for now
The Reserve Bank of Australia (RBA) held rates at 3.60% for a second meeting in early November, as most expected. The message stayed calm and measured — no urgency to tweak policy in either direction.
The RBA flagged persistent inflation stickiness and a labour market that’s tight enough to keep pressure on prices. Governor Michele Bullock called policy “pretty close to neutral”, hinting at little appetite for near-term rate changes.
She also noted that the 75 bps of cuts already delivered haven’t fully filtered through yet. Policymakers want clearer signals on demand before making any moves.
Market pricing reflects that caution: About a 93% chance of no change on December 9, and barely 4 basis points of easing pencilled in by end-2026.
The November Minutes added some colour, outlining three reasons to stay on hold: Stronger demand, sticky inflation or weak productivity, and the sense that policy is still somewhat restrictive. But they also left the door open: A softer labour market or a marked pullback in household spending could justify more easing.
Technical perspective
AUD/USD continues to navigate its lower end of the range, putting its key 200-day SMA to the test in a context of persistent downward pressure.
If AUD/USD clears its 200-day SMA at 0.6459 in a sustainable fashion, it could then open the door to a potential drop toward the October floor at 0.6440 (October 14), ahead of the August base at 0.6414 (August 21) and the June valley of 0.6372 (June 23).
In the opposite direction, there are provisional hurdles at the 100-day and 55-day SMAs at 0.6533 and 0.6548, respectively, prior to the November top at 0.6580 (November 13) and the October peak of 0.6629 (October 1). Extra gains could revisit the 2025 ceiling of 0.6707 (September 17), followed by the 2024 top at 0.6942 (September 30) and the 0.7000 yardstick.
Furthermore, momentum indicators favour extra retracements in the short-term horizon: The Relative Strength Index (RSI) lingers over the 40 region, while the Average Directional Index (ADX) around 14 indicates that the current trend remains weak.
Big picture
AUD/USD still looks a bit fragile. If the pair slips cleanly below 0.6400, it could easily slide further. China’s slow-moving post-COVID recovery and lingering trade uncertainties aren’t doing the Aussie Dollar any favours either, making it hard for the currency to gain any real and lasting momentum.
That said, it’s not all one-way traffic. The RBA’s steady, cautious approach, slightly better signs coming out of China, and a softer US Dollar are at least providing some lift, even if any move higher is likely to be a bit of a grind.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
- AUD/USD remains under pressure near the 0.6450 region on Monday.
- The US Dollar trades in a vacillating mood amid hopes of further Fed rate cuts.
- Investors will be closely following the inflation data in Australia on Wednesday.
The Australian Dollar (AUD) trades on the back foot in a discouraging start to the new trading week, with AUD/USD challenging its critical 200-day SMA in the 0.6450-0.6460 band following Friday’s decent uptick.
The lack of a clear direction in spot comes amid the marginal advance in the US Dollar (USD), as investors continue to digest the mixed results from the US labour market report in September and renewed hopes of a rate cut by the Federal Reserve (Fed) in the next few months.
Australia: Moving forward, but not in a hurry
Australia’s economy isn’t exactly sprinting, but it’s not losing steam either. The November preliminary PMIs told a reasonably solid story: Manufacturing lifted to 51.6 (from 49.7) and Services inched up to 52.7 (from 52.5).
Retail Sales were also respectable, rising 4.3% YoY in September, while the trade surplus widened to A$3.938 billion. Business Investment improved in Q2, which helped GDP grow 0.6% QoQ and 1.1% YoY. Nothing spectacular, but steady enough to keep the wheels turning.
The labour market added a bit more confidence. October’s Unemployment Rate slipped to 4.3%, and Employment Change bounced back with a +42.2K print, a sign that conditions might be firming again.
On inflation, and ahead of the next release on November 26, it’s worth remembering that the Monthly CPI Indicator (Weighted Mean) ticked up to 3.5% in September. The Trimmed Mean came in at 3.0% YoY and the headline CPI at 3.5%, still too hot for comfort.
China: Supporting, but not supercharging
China remains a crucial piece of the puzzle for Australia, and its recovery continues, just without much acceleration.
GDP expanded 4.0% YoY in Q3 and October Retail Sales grew 2.9% YoY. But some softness crept in elsewhere: the RatingDog Manufacturing PMI eased to 50.6 and Services slipped to 52.6. Industrial Production also disappointed, up 4.9% YoY.
Trade data told a similar story, with the surplus narrowing from $103.33 billion to $90.45 billion in September. Inflation did surprise on the upside, though: headline CPI rebounded to 0.2% YoY thanks to holiday spending, while core CPI improved to 1.2%.
As widely expected, the People’s Bank of China (PBoC) left its Loan Prime Rates (LPR) unchanged, 3.00% for the one-year and 3.50% for the five-year.
RBA: Keeping things steady for now
The Reserve Bank of Australia (RBA) held rates at 3.60% for a second meeting in early November, as most expected. The message stayed calm and measured — no urgency to tweak policy in either direction.
The RBA flagged persistent inflation stickiness and a labour market that’s tight enough to keep pressure on prices. Governor Michele Bullock called policy “pretty close to neutral”, hinting at little appetite for near-term rate changes.
She also noted that the 75 bps of cuts already delivered haven’t fully filtered through yet. Policymakers want clearer signals on demand before making any moves.
Market pricing reflects that caution: About a 93% chance of no change on December 9, and barely 4 basis points of easing pencilled in by end-2026.
The November Minutes added some colour, outlining three reasons to stay on hold: Stronger demand, sticky inflation or weak productivity, and the sense that policy is still somewhat restrictive. But they also left the door open: A softer labour market or a marked pullback in household spending could justify more easing.
Technical perspective
AUD/USD continues to navigate its lower end of the range, putting its key 200-day SMA to the test in a context of persistent downward pressure.
If AUD/USD clears its 200-day SMA at 0.6459 in a sustainable fashion, it could then open the door to a potential drop toward the October floor at 0.6440 (October 14), ahead of the August base at 0.6414 (August 21) and the June valley of 0.6372 (June 23).
In the opposite direction, there are provisional hurdles at the 100-day and 55-day SMAs at 0.6533 and 0.6548, respectively, prior to the November top at 0.6580 (November 13) and the October peak of 0.6629 (October 1). Extra gains could revisit the 2025 ceiling of 0.6707 (September 17), followed by the 2024 top at 0.6942 (September 30) and the 0.7000 yardstick.
Furthermore, momentum indicators favour extra retracements in the short-term horizon: The Relative Strength Index (RSI) lingers over the 40 region, while the Average Directional Index (ADX) around 14 indicates that the current trend remains weak.
Big picture
AUD/USD still looks a bit fragile. If the pair slips cleanly below 0.6400, it could easily slide further. China’s slow-moving post-COVID recovery and lingering trade uncertainties aren’t doing the Aussie Dollar any favours either, making it hard for the currency to gain any real and lasting momentum.
That said, it’s not all one-way traffic. The RBA’s steady, cautious approach, slightly better signs coming out of China, and a softer US Dollar are at least providing some lift, even if any move higher is likely to be a bit of a grind.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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