Australian Dollar Price Forecast: Bears now look at the 200-day SMA

The Aussie Dollar remains unable to find sustainable upside traction, keeping its trade below the key 0.7000 yardstick for now. So far, the constructive tone should remain unchallenged while above its critical 200-day SMA. In the meantime, the dynamics surrounding the US Dollar continue to dictate the price action in spot, while the RBA’s cautious stance also appears to have put a floor under the Aussie…for now.

The Australian Dollar (AUD) comes under extra downside pressure on Wednesday, motivating AUD/USD to add to Tuesday’s losses and retreat toward the low 0.6900s, hitting at the same time new four-day troughs.

The pair’s decline comes on the back of modest gains in the US Dollar (USD), which sees its buying interest revitalised in response to renewed tensions in the Middle East.

Solid foundations, softer momentum

The Australian economy does look healthy and stable altogether and, honestly, in much better shape than many of its G10 peers.

This performance appears underpinned by a solid domestic demand and pretty decent figures when it comes to economic growth. The spectre of sticky inflation seems to justify the cautious and data-dependent stance from the Reserve Bank of Australia (RBA), particularly following the latest meeting, where it raised rates to 4.35%, broadly in line with market expectations.

Supporting the above, the final data from the June Purchasing Managers’ Index (PMI) showed Manufacturing at 51.5 (from 50.7) and Services at 50.5 (from 48.7).

Removing some shine from the domestic fundamentals, the latest trade balance figures showed a A$3.018 billion deficit in May, reversing April’s A$1.383 billion surplus. The latest Gross Domestic Product (GDP) data, meanwhile, kind of disappointed expectations: the economy expanded by 0.3% QoQ in Q1 2026 (from 0.9%) and 2.5% YoY (from 2.5%), both prints missing consensus.

Still on the bright side, the labour market remains healthy. Indeed, the Unemployment Rate ticked lower to 4.4% in May (from 4.5%), and the Employment Change increased by 40.6K individuals (from the revised 40.7K drop seen in the previous month).

Regarding inflation, May data was far from telling after the Consumer Price Index (CPI) ticked lower to 4.0% from a year earlier (from 4.2%), while the Trimmed Mean and the Weighted Median rose to 3.6% over the last twelve months (from 3.4%). The pace of disinflation remains weak, although the direction is still broadly correct. Somehow reinforcing that view, the latest Melbourne Institute’s Consumer Inflation Expectations eased to 5.5% in May (from 5.6%).

For the RBA, that means the job is still incomplete, as policymakers continue to signal that inflation may only return to target around mid-2028, keeping the focus firmly on patience rather than any imminent pivot.

Looking ahead, investors expect the central bank to maintain its current stance at its August meeting, while they now anticipate just around 10 basis points of tightening by year-end.

China keeps the floor in place

China now looks more like a stabilising force than the tailwind it usually provides to the Australian economy.

Let’s see some numbers: the economy expanded by 5.0% YoY in Q1, while Retail Sales unexpectedly contracted by 0.6% in the year to May but expanded by 1.41% since January. In addition, Industrial Production exceeded expectations last month after expanding by 4.5% from a year earlier.

Of note is the strong recovery of the trade balance, with May’s surplus widening to $105.43 billion from around $84.8 billion in the previous month and both imports and exports expanding markedly.

In the same line, business activity seems to be regaining traction after the National Bureau of Statistics (NBS) reported Manufacturing PMI at 50.3 in May (from 50) and Services at 50.2 (from 50.1). In addition, private gauges like RatinDog remained in expansionary territory in Jule, as Manufacturing came in at 51.7 and Services at 54.1.

The disinflationary trend in China seems to have re-emerged after the CPI disappointed expectations and rose by 1.2% in the year to May, matching the previous reading. On a monthly basis, prices dropped by 0.1%, while Producer Prices gained 3.9% over the last twelve months, also holding steady from April’s prints.

In the meantime, and matching the broad consensus, the People’s Bank of China (PBoC) kept its Loan Prime Rates (LPR) unchanged at 3.00% for the one-year tenor and 3.50% for the five-year tenor at its event earlier on Monday.

In summary, China is no longer pushing growth higher, but it is not dragging it down aggressively either. It is simply keeping things steady.

Patience remains the policy

As broadly awaited by market participants, the Reserve Bank of Australia (RBA) left its Official Cash Rate (OCR) unchanged at 4.35% at its event early in the month. 

Indeed, the RBA adopted a hawkish stance at its latest meeting, reiterating that inflation remains too high and cautioning that more rate rises may yet be necessary if price pressures persist. Policymakers also noted continuing concerns from increased energy costs and underlined their commitment to preventing inflation from becoming entrenched.

That said, Governor Michele Bullock was a little more measured in tone at her press conference. She kept the option of additional tightening open but said the incoming data had generally progressed as expected and showed the Board did not need to tighten at this meeting. The economy is not entering a recession, and the employment market is still reasonably tight, she said.

The message in general was one of cautious tolerance. Inflation is still the bank's biggest worry, but officials seem more satisfied with the progress made so far and prepared to let past rate rises have more time to work through the economy. Further tightening is feasible, but the bar for another rate rise appears higher than the phrase alone may lead one to expect.

What's more, the RBA’s Minutes reinforced the bank’s cautious tone, with policymakers still committed to keeping policy restrictive until inflation is firmly on track to return to target.

Indeed, board members agreed that leaving interest rates unchanged offered the best balance between curbing inflation and supporting employment. They also reiterated that another rate hike is possible if price pressures prove more persistent than expected. Rate setters also pointed to the Middle East conflict, elevated Oil prices and weak productivity as key upside risks to inflation.

Even so, the board acknowledged that tighter financial conditions are gradually having the desired effect. Recent data suggest the economy is slowing broadly as expected, while the housing market has softened more than anticipated. Minutes generally reaffirm the RBA is comfortable on hold for now but still leans hawkish if inflation doesn't moderate as expected.

The path higher gets steeper

Base case

While above its key 200-day SMA, just over 0.6860, the pair’s outlook is expected to remain tilted to further advances. However, for such a scenario to materialise, it needs a strong catalyst to emerge and is heavily dependent on the broader backdrop: without a sustained improvement in risk sentiment or continued US Dollar weakness, the probability of extra gains could start to lose momentum.

Bull case

Further conviction is needed. If risk appetite picks up serious pace, spot should first meet the psychological 0.7000 barrier, then the 0.7200 yardstick, before reaching the 2026 peak near 0.7280, just ahead of the minor 0.7300 barrier. Further up, the 2022 ceiling at 0.7593 is still in place. Speculative positioning seems to be leaning toward this scenario for now.

Bear case

In the current volatile context, we should not rule out the loss of further momentum. If sentiment deteriorates, the Greenback gains extra momentum, or Chinese data continue to disappoint, spot could recede further and initially challenge its critical 200-day SMA near 0.6860.

The eventual recovery appears more distant in the current context, and it seems market participants are taking notes of these developments.

Bearish positioning deepens, but capitulation is still not there

Speculative positioning in the Australian Dollar was more bearish in the week ending 30 June, with net positioning sliding to -17.7K contracts from -13.0K a week ago, according to data from the Commodity Futures Trading Commission (CFTC). This marks a deeper move into net short territory and confirms that investors continue to reduce exposure to the Aussie after the sharp reversal seen over the past month.

The weekly decline in net positioning was sizeable at -13.6K contracts, while the 4-week change further deteriorated to -77.9K from -73.2K. That points to continued negative positioning momentum, even if the pace of liquidation has become less dramatic than the initial unwind from earlier crowded long positions.

In addition, open interest was broadly stable, rising slightly to 215.8K contracts from 214.3K. That is an important shift from the previous week, when participation collapsed. With open interest no longer falling sharply, the latest move looks less like pure long liquidation and more like a market beginning to add bearish exposure, although not aggressively enough to suggest full capitulation.

Historical measures still argue for some nuance. Despite the deeper net short position, both the net positioning percentile and speculative percentile remain elevated at 78, suggesting speculative exposure is still high relative to the past five years.

In other words, the market has turned more cautious on AUD, but positioning has not yet moved into historically depressed territory. The broader message remains one of an ongoing transition from crowded bullish exposure toward a more bearish stance, rather than a fully entrenched bearish consensus.

What could move the Aussie next?

In the near term, the US Dollar, global risk sentiment, and geopolitics remain the main focus. Those remain the key drivers of price action. The next release of note is expected to land in China, with inflation figures due on Thursday. In Oz, next on tap will be the publication of the Consumer Confidence gauge by Westpac.

Key risks include a sharper slowdown in China, a persistently cautious Fed, a change in investors' risk sentiment, or any shift in the RBA’s stance. Any of these could quickly destabilise the Australian currency in the near term.

Technical levels

In the daily chart, AUD/USD trades at 0.6927, holding below the 55-day and 100-day simple moving averages (SMAs) at 0.7088 and 0.7069, which reinforces a bearish near-term bias despite the pair stabilizing above the 200-day SMA at 0.6873. The Relative Strength Index (14) around 39 suggests weak bearish momentum rather than oversold conditions, while the firm Average Directional Index (14) near 37 hints that the current downtrend retains sufficient directional strength.

On the downside, initial support emerges at the horizontal level of 0.6833, followed by deeper floors at 0.6660 and 0.6593, with broader structure anchored by 0.6414 and 0.6373. On the topside, immediate resistance is seen at the horizontal barrier near 0.7079, closely aligned with the 100-day SMA at 0.7069 and the 55-day SMA at 0.7088 forming a dense cap, while higher hurdles are stacked at 0.7278 and 0.7283 ahead of 0.7661.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

The final takeaway

The larger background for the Australian Dollar remains somewhat positive but is losing some momentum. Meanwhile, the RBA's prudent approach could give some support on occasional bearish moves.

However, the AUD continues to fluctuate strongly on emotion: when confidence is high, the Aussie does well, but when doubt sets in, the US Dollar usually takes control.

So, although the medium-term narrative remains positive, the near-term outlook becomes less assured. Conviction is lacking, despite the potential for growth.