|

AUD/USD Price Forecast: A drop to the March low is not ruled out

  • AUD/USD built on weekly losses and revisited the 0.6270 region.
  • The US Dollar extended its post-Fed upside impulse to weekly highs.
  • The Australian labour market report came in on the weak side.

The Australian Dollar (AUD) stayed on the back foot for a third straight session on Thursday, with AUD/USD extending the weekly pullback to the 0.6370 region, coincident with the provisional 55-day SMA.

Meanwhile, the US Dollar (USD) gained further traction helped by speculation that the Fed might keep its restrictive stance for longer following the latest FOMC event and Chair Powell’s comments. Against that, the US Dollar Index (DXY) added to Wednesday’s recovery and rose to multi-day peaks north of the 104.00 level.

Trade tensions under the microscope 

Ongoing uncertainty over US trade policy continues to unsettle investors, who fear potential retaliatory measures from US trading partners. The threat of a broader trade war is weighing on risk-sensitive currencies, including the Aussie. As Australia relies heavily on exporting commodities to China, any slowdown in its top trading partner—especially if triggered by US tariffs—could take a toll on the Australian economy.

Central banks and the inflation conundrum 

Worries about trade-fueled inflation nudging the Federal Reserve (Fed) toward a more prolonged tightening cycle are clashing with mounting concerns over a US economic slowdown.

The FOMC delivered a "mixed hold" on Wednesday, keeping the Fed funds target rate unchanged at 4.25-4.50%, as widely expected. In a unanimous decision, the Committee noted that uncertainty remains elevated, prompting a slight tweak in its statement.

Fed Chair Powell reiterated his March 7 guidance, stating, "We do not need to be in a hurry, and are well positioned to wait for greater clarity." He also explained that while the updated Fed funds rate projections remain unchanged, the details now lean toward less easing.

The FOMC further revised its outlook by lowering its real GDP growth forecast and raising its inflation expectations. Powell attributed much of the inflation uptick to tariffs, remarking that they "tend to bring growth down and they tend to bring inflation up."

Across the Pacific, the Reserve Bank of Australia (RBA) trimmed its benchmark rate by 25 basis points in February to 4.10%. Governor Michele Bullock emphasized that any further adjustments will depend on inflation data, while Deputy Governor Andrew Hauser cautioned against assuming a rapid series of cuts. Still, many analysts expect the RBA could roll out up to 75 basis points of additional easing if trade tensions intensify.

Recent RBA minutes showed policymakers debating between holding rates steady or opting for a smaller cut. Ultimately, they chose a 25-basis-point reduction but stressed that this does not guarantee a broader easing cycle. Officials also highlighted that Australia’s peak rate remains relatively low by global standards, partly due to a resilient domestic labour market.

On the latter, the Employment Change shrank by 52.8K individuals in February, reversing the previous month’s gain, while the Unemployment Rate held steady at 4.1%

AUD/USD Technical Outlook 

A decisive break above the 2025 peak at 0.6408 (February 21) could open the door toward the 200-day Simple Moving Average (SMA) at 0.6520, with the November 2024 high at 0.6687 (November 7) looming beyond.

On the flip side, immediate support lies at the March low of 0.6186 (March 4). A deeper pullback could test the 2025 trough at 0.6087, with the psychologically significant 0.6000 mark just below.

Momentum indicators paint a mixed picture: the Relative Strength Index (RSI) has slipped below 48, pointing to waning bullish pressure, while the Average Directional Index (ADX) hovering around 11 suggests a generally weak trend overall.

AUD/USD daily chart

Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

More from Pablo Piovano
Share:

Editor's Picks

AUD/USD bulls seem hesitant below 0.7050 ahead of RBA on Tuesday

AUD/USD reverses an Asian session dip on Monday as renewed optimism over Iran diplomacy boosts investor confidence, keeping a lid on the safe-haven US Dollar and supporting the risk-sensitive Aussie. Spot prices, however, remain below the one-month high, touched last Thursday, as bulls wait for the crucial RBA decision before taking fresh positions.



USD/JPY climbs to 158.00 neighborhood as BoJ uncertainty weighs on the JPY

The USD/JPY pair gains some positive traction at the start of a new week, recovering further from Friday's post-Bank of Japan (BoJ) swing low to sub-157.00 levels. The momentum lifts spot prices to the 158.00 neighborhood during the Asian session and seems unaffected by fresh intervention warning from Japan's Finance Minister Satsuki Katayama.

Gold trims intraday gains; trades below $3,900 as Fed hike bets counter weak USD

Gold trims part of its modest intraday gains, trading with a mild positive bias below the $3,900 mark during Monday’s early European session. The US Dollar attracts fresh sellers amid optimism over a potential diplomatic breakthrough to end the US-Iran war and offers some support to the commodity. Meanwhile, US Federal Reserve rate-hike bets remain firmly on the table amid energy-driven inflation concerns, keeping the non-yielding yellow metal near the October 2025 low touched on Friday.

Dogecoin risks deeper slide as whales diverge

Dogecoin hovers around $0.075 on Monday after falling for the fifth consecutive week since the end of September. Santiment data shows diverging whale activity, as large holders reduce their positions while smaller whale wallets accumulate tokens. Meanwhile, weakening on-chain metrics and a deteriorating technical outlook suggest that DOGE could remain vulnerable to further losses.

Middle East War updates: Iran warns of expanded strikes against US despite progress in talks

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.

The 2% inflation target came from a throwaway remark. It now moves trillions
The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.