|

AUD/USD Price Forecast: Headwinds come from Dollar dynamics and China

  • AUD/USD faced fresh selling pressure just above the key 0.6300 barrier.
  • The US Dollar remained well bid on the back of firmer US CPI data.
  • Chief Powell reiterated its cautious message in his second testimony.

The US Dollar (USD) regained some composure and rose to weekly peaks around the 108.50 region on Wednesday, all in response to firmer-than-expected US inflation data.

On that, AUD/USD rapidly lost momentum, fading two daily gains in a row and coming all the way down to the 0.6235-0.6230 band soon after briefly trespassing the key 0.6300 hurdle.

Trade turbulence and tariff tensions

Despite the ongoing trade drama, the Australian Dollar (AUD) has followed its risk-linked peers higher in past days, although that move seems to have exclusively followed the loss of momentum in the Greenback and steady uncertainty surrounding the White House’s tariff narrative.

Global trade dynamics remain volatile. President Trump’s move to postpone a 25% tariff on Canadian and Mexican imports by one month briefly lifted risk appetite, but new tariff threats quickly reversed this optimism.

Meanwhile, the US imposed a 10% tariff on Chinese imports, sparking fears of retaliation from Beijing. For Australia, China is its largest export market, so potential countermeasures could hit demand for Australian commodities. Beijing is hinting it may challenge these tariffs at the WTO, heightening concerns in resource-exporting countries like Australia.

Inflation, Fed policy, and the road ahead

Though the US Dollar has regained some ground lost last week, the risk of an escalating trade war lingers. If tensions grow, inflation in the US might climb higher, prompting the Federal Reserve (Fed) to maintain interest rates at elevated levels for longer.

In Australia, the spotlight is on the Reserve Bank of Australia (RBA). Inflation appears to be softening—Q4 Consumer Price Index (CPI) data showed a year-over-year rise of 2.5%, down from 2.8% previously. More notably, the trimmed mean CPI, a key RBA measure, fell to a three-year low of 3.2%. This has fueled speculation of a 25 basis point rate cut at the upcoming February 18 meeting, with further cuts possible over the next year.

Commodities offer mixed support

On the commodities front, concerns about weaker Chinese demand usually weigh on Australian exports such as iron ore and copper. While these commodities remain central to Australia’s economy, their prices remain in the upper end of the yearly range so far, which could limit the extend of occasional bouts of selling pressure.

Technical snapshot

For AUD/USD, 0.6087 remains a critical support level—the lowest point recorded this year. A decisive break below that could see the pair quickly target 0.6000. On the upside, resistance lies at the yearly peak of  0.6330, seconded by the transitory 100-day SMA at 0.6457, and 0.6549 (the weekly high from November 25).

Technical indicators are sending mixed signals: the Relative Strength Index (RSI) has eased below  49, but the Average Directional Index (ADX) has declined to about 18, indicating the trend may be losing strength.

AUD/USD daily chart

What’s Next?

Looking ahead, Australia’s economic calendar features the Melbourne Institute’s Consumer Inflation Expectations on February 14.

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to PremiumSign In

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:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD posts modest gains above 1.1700 as ECB signals pause

The EUR/USD pair posts modest gains around 1.1710 during the early Asian session on Monday. The Euro strengthens against the Greenback after the European Central Bank left its policy rates unchanged and took a more positive view on the Eurozone economy, which has shown resilience to global trade shocks. Financial markets are likely to remain subdued as traders book profits ahead of the long holiday period.

GBP/USD steadies below 1.3400 as traders assess BoE policy outlook

Following Thursday's volatile session, GBP/USD moves sideways below 1.3400 on Friday. Investors reassess the Bank of England's policy oıtlook after the MPC decided to cut the interest rate by 25 bps by a slim margin. Meanwhile, the improving risk mood helps the pair hold its ground.

Gold: 2026 could see new record-highs but a 2025-like rally is unlikely

Gold started the year on a bullish note and registered impressive gains in the first quarter. Following a consolidation phase during the summer months, the precious metal surged higher in the third quarter and reached an all-time record high of $4,381 in October. Although XAU/USD corrected lower, buyers refused to hand over the reins heading into the holiday season.

Week ahead: Key risks to watch in last days of 2025 and early 2026

The festive period officially starts next week, with many traders vacating their desks until the first full week of January, making way for thin trading volumes and very few top-tier releases.

How much can one month of soft inflation change the Fed’s mind?

One month of softer inflation data is rarely enough to shift Federal Reserve policy on its own, but in a market highly sensitive to every data point, even a single reading can reshape expectations. November’s inflation report offered a welcome sign of cooling price pressures. 

XRP rebounds amid ETF inflows and declining retail demand demand

XRP rebounds as bulls target a short-term breakout above $2.00 on Friday. XRP ETFs record the highest inflow since December 8, signaling growing institutional appetite.