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AUD/USD Price Forecast: Further gains now look likely near term

  • AUD/USD extended its rebound and approached the 0.6500 hurdle.
  • The US Dollar maintained its bearish note, dropping to multi-day lows.
  • China’s Caixin Manufacturing and Services PMIs lost momentum in April.

The Australian Dollar (AUD) built on its recent momentum Tuesday, extending its advance against the US Dollar (USD) for a third straight session. AUD/USD edged closer to the key 0.6500 threshold, supported by a broadly weaker Greenback and signs of easing trade tensions between Washington and Beijing.

A firmer risk tone across global markets further bolstered the Aussie, which remained buoyed even as the Greenback came under renewed pressure.

Australia's China link still a double-edged sword

While trade signals between the US and China have turned more constructive, markets remain cautious about how quickly that will translate into economic gains—especially for Australia, whose economy remains heavily tethered to Chinese demand.

Any signs of political friction or softer growth out of Beijing could weigh disproportionately on the AUD, regardless of improvements elsewhere.

Central bank messaging splits

The Federal Reserve (Fed) and Reserve Bank of Australia (RBA) both held interest rates steady at recent meetings, but the tone from each central bank diverged.

Fed Chair Jerome Powell maintained a data-dependent approach, reiterating a cautious stance on rate cuts until inflation moves convincingly toward target. RBA Governor Michele Bullock, meanwhile, pointed to sticky inflation and a tight labour market as reasons for keeping the cash rate at 4.10%.

Australia’s latest inflation data showed headline and trimmed mean CPI running hotter than expected—reinforcing the case for patience on rate cuts. While markets still fully price in a 25 basis points cut at the bank’s 20 May meeting, hopes for a larger move have faded. Traders currently see scope for up to 125 basis points of easing over the next year.

In the US, the Fed is widely expected to keep its policy rate unchanged in the 4.25%–4.50% range at its May 7 event.

Positioning suggests sentiment shift

Fresh CFTC data revealed that net short positions in the Australian Dollar fell to seven-week lows—around 50K contracts—as of 29 April. A simultaneous uptick in open interest hints that speculative sentiment toward the Aussie may be starting to stabilise.

Quiet domestic calendar

Australia’s data docket is light this week. Preliminary Building Permits and Private House Approvals contracted at a monthly 8.8% and 4.5%, respectively, in March. The Ai Group Industry Index is due on May 7.

Technical picture: Momentum building?

AUD/USD climbed above its 200-day simple moving average (SMA) at 0.6460. A firm break higher could pave the way for a test of the November 2024 high at 0.6687 and suggest a more constructive medium-term outlook.

Temporary support lies at the 55- and 100-day SMAs (0.6312 and 0.6284, respectively). A move below those could open the door to deeper losses toward the 2025 bottom at 0.5913—or even the pandemic-era bottom near 0.5506.

Momentum signals remain bullish. The Relative Strength Index (RSI) near 63 points to continued upside potential, while a strengthening Average Directional Index (ADX) near 22 suggests the pair’s rebound may be gathering traction.

AUD/USD daily chart

Outlook: Rebound faces structural headwinds

While the near-term tone for AUD/USD is constructive, risks remain skewed to the downside. Persistent domestic inflation, uncertainty around Chinese demand, and global trade tensions mean rallies could be short-lived without a clear catalyst from data or geopolitics.

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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.

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