AUD/USD Price Forecast: Extra gains should not be ruled out in the near term

• AUD/USD traded on the defensive, faltering ahead of the 0.6300 level.
• The US Dollar managed to gather some upside momentum on Thursday.
• Australia’s trade surplus shrank to A$5.085B in December.

Finally, some respite for the US Dollar (USD) emerged on Thursday as the currency set aside three consecutive days of losses, allowing the US Dollar Index (DXY) to come close to the key 108.00 barrier once again. The Dollar’s uptick was also underpinned by the mild bounce in United States (US) yields despite the absence of any improvement in the US tariffs narrative.

In contrast, the Australian dollar (AUD) halted its multi-day positive streak, motivating AUD/USD to come just short of the key resistance area in the 0.6300 neighbourhood on Thursday.

Indeed, the pair’s recovery from levels last seen in April 2020—when it dipped below 0.6100 on Monday—has met quite a decent hurdle at yearly peaks around 0.6300 so far, failing to break it in a convincing fashion.

That bull run in the Aussie, however, appears to be more about a weakened US Dollar than a reflection of stronger Australian economic fundamentals.

Tariffs and trade turbulence

The trade winds have been particularly unpredictable lately. On the one hand, President Donald Trump’s decision to delay a 25% duty on Canadian and Mexican imports by a month offered a brief reprieve for risk assets, prompting a swift sell-off in the US Dollar.

On the other hand, the US announced a 10% tariff on Chinese imports, igniting fears of potential retaliatory measures from Beijing. This development is a red flag for Australia, given China’s status as its largest export market. With Beijing hinting at a possible WTO challenge, the spectre of reduced demand for Australia’s resource exports looms large.

Inflation, Fed policy and the road ahead

Even as the US Dollar wanes, the likelihood of a full-blown trade war remains. Such tensions could stoke inflation in the US, compelling the Federal Reserve (Fed) to maintain higher interest rates for an extended period. Meanwhile, speculation is rife about the Reserve Bank of Australia’s (RBA) next move.

In fact, recent data paints a picture of easing inflationary pressures in Australia, with the latest Q4 Consumer Price Index (CPI) showing a YoY increase of 2.5%—a decline from the previous quarter’s 2.8%. More notably, the trimmed mean CPI, a key indicator for the RBA, fell to a three-year low of 3.2%, sparking expectations of a 25 basis point rate cut at the upcoming February 18 meeting, with potential for further easing over the next year.

Commodities bolster the Aussie

On the commodities front, even though subdued Chinese demand has traditionally pressured Australian exports like iron ore and copper, prices for these key resources have rebounded this week. This recovery has provided additional support for AUD and act as a buffer against downside potential, offering a glimmer of hope amid broader uncertainties.

Technical insights

From a technical standpoint, caution is advised. For AUD/USD, critical support sits at 0.6087—the lowest level seen so far in 2025. A breach of this support could send the pair spiralling toward the 0.6000 mark. Conversely, resistance is found at 0.6330, with an upper hurdle at 0.6549, the weekly high from November 25.

Although momentum indicators offer mixed signals—the Relative Strength Index (RSI) has edged above 54, hinting at bullish pressure, while the Average Directional Index (ADX) receded below 20, suggesting the current trend might be losing steam—the road ahead remains fraught with uncertainty.

AUD/USD daily chart

What’s next on the radar?

Looking forward, next week’s data releases include Building Permits and Private House Approvals on February 10, Westpac’s Consumer Confidence gauge and Business Confidence measured by NAB will come on February 11, while Home Loans and Investment Lending for Homes are expected on February 12, prior to Consumer Inflation Expectations tracked by the Melbourne Institute on February 14.