AUD/USD Price Forecast: Near-term gains appear capped by 0.6400

The US Dollar (USD) traded in a vacillating fashion at the beginning of the week, motivating the US Dollar Index (DXY) to remain close to recent lows in the sub-104.00 zone. Traders grew wary over the health of the United States (US) economy and remained uncertain about future trade policies—two factors that combined to undermine the greenback’s recent stability.

Meanwhile, the Australian Dollar (AUD) alternated gains with losses after two daily pullbacks in a row, orbiting around the 0.6300 zone against the backdrop of a generalised cautious trade in the FX world. Also weighing on the AUD, concerns over the recovery of the Chinese economy re-emerged after Chinese inflation data showed consumer prices fell in February.

Trade tensions cast a shadow

Escalating trade disputes still loom large, especially for risk-sensitive currencies like the Aussie. New tariffs—including a 25% levy on Canadian and Mexican products and a 20% duty on Chinese imports—have stirred investor concerns about further retaliatory measures, supporting the view of a broader trade war at the same time.

Given China’s status as Australia’s biggest trading partner, any slowdown in Chinese demand could dent Australia’s commodity exports, ultimately weighing on the AUD.

On the latter, Australia’s commodity-driven economy continues to be centric for the Aussie’s price action. Furthermore, copper prices built on Friday’s downswing and iron ore prices receded further amid the broader multi-day consolidative range.

Central banks and inflation: The ongoing story

With trade tensions threatening to stoke inflation, the Federal Reserve (Fed) could be forced to keep monetary policy tighter for longer.

Over in Australia, the RBA’s February 25-basis-point rate cut to 4.10% came with the caveat that it might not mark the start of a longer easing cycle. Governor Michele Bullock emphasized that any further rate decisions hinge on incoming inflation data, while Deputy Governor Andrew Hauser tempered market expectations for multiple cuts. Still, many traders are pricing in as much as 75 basis points of additional easing over the next year, driven by the global uncertainty swirling around trade conflicts.

Inflation and rate outlook

Australia’s January Monthly CPI Indicator landed at 2.5%, slightly below forecasts. RBA meeting Minutes hinted at a lively debate between keeping rates steady or opting for a minor cut—ultimately choosing the latter while making it clear that no long sequence of cuts is guaranteed. Policymakers noted that Australia’s interest rate peak remains relatively low and that the country enjoys solid labour market conditions compared to its global counterparts.

AUD/USD technical landscape

Technically, further upside in AUD/USD should retest the 2025 high at 0.6408 (set on February 21). A decisive break above this level could pave the way for a climb toward the 200-day Simple Moving Average (SMA) at 0.6532.

On the downside, initial support lies at the March low of 0.6186 (March 4), with further declines possibly targeting the 2025 bottom at 0.6087 and, in a worst-case scenario, the psychological 0.6000 mark.

Momentum indicators are leaning somewhat bearish—the RSI has deflated to around 51, indicating some modest loss of strength—though the ADX reading near 13 suggests the broader trend remains somewhat subdued.

AUD/USD daily chart

Key data releases ahead

Looking forward, traders will keep a close eye on Westpac Consumer Confidence and NAB Business Confidence figures due on Tuesday. Additional data on final Building Permits, Private House Approvals, and Industrial Production—scheduled for Thursday—will also provide fresh insights into the health of the Australian economy and help shape the next moves for AUD/USD.