AUD/USD Price Forecast: The 0.6400 area continues to cap the upside

The Australian Dollar (AUD) failed to maintain its positive momentum alive on Wednesday, with AUD/USD navigating quite a volatile range within 0.6280 and 0.6330. The pair lost impulse after climbing to fresh four-day highs near 0.6330, hovering close to the 100-day Simple Moving Average (SMA).

The pair’s price action was largely fueled by renewed upside pressure on the US Dollar (USD), which managed to resume its ongoing recovery against a backdrop of persistent trade anxieties and encouraging geopolitical developments.

Greenback bounces along with US yields

In the meantime, the US Dollar Index (DXY) reclaimed the 104.00 barrier and beyond, resuming its rebound from last week’s multi-week lows near 103.20, helped by a decent bounce in US yields across different time frames.

Lingering uncertainties about US trade policies—along with shifting sentiment that the Federal Reserve (Fed) may opt for fewer rate hikes—kept the Greenback on a positive mood.

Trade tensions keep markets on edge

Despite recent optimism, concerns over potential US trade measures continue to loom large, as any further tariffs could provoke retaliatory moves from America’s trading partners.

These fears disproportionately impact risk-sensitive currencies like the Aussie, given Australia’s heavy reliance on commodity exports to China. A slump in Chinese demand would send shockwaves through the Australian economy, pressuring both growth and the AUD.

Fed caught between inflation and slowdown

Meanwhile, the Federal Reserve (Fed) faces a delicate balancing act. Ongoing trade disputes could stoke inflation, raising the possibility of a more extended tightening cycle. Yet, a slower US economy—despite a still-resilient labour market—argues for a more cautious approach.

Last week, the Fed held its benchmark rate at 4.25–4.50%, matching expectations. While no immediate policy changes were announced, Chair Jerome Powell reiterated that the central bank could afford to wait for clearer signals. The Fed’s latest projections trimmed growth estimates and nudged inflation forecasts higher, with tariffs cited as a key factor driving up prices.

RBA could resume its easing in May?

Across the Pacific, the Reserve Bank of Australia (RBA) reduced its benchmark rate by 25 basis points to 4.10% in February. Governor Michele Bullock has signaled that further rate moves hinge on upcoming inflation readings, while Deputy Governor Andrew Hauser warns against assuming a flurry of cuts is on the way. Still, many analysts see the potential for an additional 75 basis points of easing if trade conflicts deepen.

Minutes from the RBA’s recent meeting showed officials debating whether to pause or deliver a smaller cut, ultimately settling on the 25-basis-point reduction. Policymakers also noted that Australia’s peak rate remains comparatively low, aided by a robust labor market. Indeed, the latest jobs report revealed a 52.8K drop in employment for February—erasing January’s gains—while the Unemployment Rate held steady at 4.1%.

Meanwhile, in Oz, the RBA’s Monthly CPI Indicator (Weighted Mean CPI) eased to 2.4% in February (from 2.5%), while the Trimmed Mean CPI eased to 2.7% in Q4. The latest monthly figures align neatly with the RBA’s projections for Q2. That said, the central bank tends to put more weight on the quarterly CPI prints, which are broader in scope and less prone to month-to-month noise.

Markets remain convinced a 25 basis point rate cut is coming in July, but odds are building—now close to 70%—that the RBA could move as early as May.

Sentiment skews bearish

From a positioning standpoint, the latest CFTC data shows net short bets on the Aussie reaching multi-week highs of roughly 70.5K contracts (as of March 18). Bearish sentiment has persisted since mid-December, bolstered by heightened tariff tensions.

AUD/USD Technical Outlook

- Upside Targets: A decisive break above the 2025 peak at 0.6408 (February 21) could pave the way to the 200-day SMA at 0.6514. Beyond that, the November 2024 high at 0.6687 (November 7) looms as a more distant target.

- Downside Risks: On the flip side, if sellers regain control, the March low of 0.6186 (March 4) provides immediate support. Below that, watch the 2025 trough at 0.6087 and the psychologically significant 0.6000 mark.

- Momentum Gauges: The Relative Strength Index (RSI) around 50 hints at improving bullish traction, while the Average Directional Index (ADX) near 10 suggests the overall trend remains subdued.

AUD/USD daily chart