AUD/USD Price Forecast: Further range bound in the pipeline

The Australian Dollar (AUD) managed to cling to small gains on Thursday, with AUD/USD orbiting around the key 0.6300 zone amid a choppy day while extending the weekly consolidative range.

The move higher in AUD/USD was largely driven by renewed weakness in the US Dollar (USD), which succumbed to renewed selling pressure amid mounting trade uncertainty and jitters around the health of the US economy. That said, the US Dollar Index (DXY) returned to the low-104.00s following weekly tops near 104.70.

Furthermore, traders are increasingly weighing the possibility that the Federal Reserve (Fed) could maintain its restrictive stance this year, but lingering trade anxieties as well as speculation over a potential US slowdown have injected fresh volatility in the Greenback’s price action.

Risk sentiment on edge as tariff fears return

Despite bouts of optimism, the spectre of further US trade action continues to cast a long shadow. Any additional tariffs could trigger tit-for-tat responses from key trading partners, stirring market volatility and dampening risk appetite.

The Aussie, being highly sensitive to global risk sentiment and China’s commodity demand, remains especially vulnerable. Any slowdown in Chinese growth could ripple through Australia’s economy, pressuring both GDP and the currency.

According to latest news, President Trump has announced 25% tariffs on US imports of automobiles, while the deadline for reciprocal tariffs continues to loom closer.

Fed walks a tightrope

The Federal Reserve, meanwhile, finds itself at a crossroads. Trade tensions risk fanning inflation, potentially justifying a longer tightening cycle. At the same time, signs of a cooling US economy argue for caution—despite the still-resilient labour market.

Last week, the Fed held rates steady at 4.25–4.50% and signalled a wait-and-see approach. Chair Jerome Powell emphasised patience, even as the Fed’s updated projections reflected lower growth and slightly higher inflation, with tariffs cited as a key inflationary force.

RBA waits on inflation clarity

On the other side of the Pacific, the Reserve Bank of Australia (RBA) trimmed its policy rate by 25 basis points to 4.10% last month. Governor Michele Bullock stressed that future moves would depend heavily on inflation data, while Deputy Governor Andrew Hauser warned against expecting a cascade of cuts.

Minutes from the RBA’s meeting revealed a close call between a pause and a smaller cut, with officials ultimately choosing caution. Australia’s robust labour market allowed for flexibility, but February’s surprise drop in employment (–52.8K) and a steady 4.1% unemployment rate raised some eyebrows.

Meanwhile, monthly inflation metrics showed easing: the Weighted Mean CPI dipped to 2.4%, and the Trimmed Mean CPI softened to 2.7% in Q4. These align with RBA forecasts, though the central bank tends to lean more on quarterly readings for policy decisions.

Markets are largely pricing in a rate cut by July, but expectations are creeping forward—nearly 70% now anticipate a move as early as May.

Speculative sentiment sours on AUD

Speculative positioning reflects the bearish tilt. According to the latest CFTC data, net shorts on the Aussie climbed to a multi-week high of around 70.5K contracts as of March 18. Bearish bets have built steadily since mid-December, fuelled by escalating tariff risks.

AUD/USD Technical Picture

- Upside Potential: A clean break above the 2025 high at 0.6408 (Feb 21) could open the door toward the 200-day SMA at 0.6511. Beyond that, the November 2024 high of 0.6687 is the next major resistance.

- Downside Risk: Should sellers retake control, immediate support lies at the March low of 0.6186 (Mar 4). Below that, look for a test of the 2025 trough at 0.6087, and potentially the key psychological level at 0.6000.

- Momentum Signals: The RSI hovering near 50 hints at balanced—though slightly bullish—momentum, while a low ADX below 10 suggests the trend lacks conviction for now.

AUD/USD daily chart