Australian Dollar Price Forecast: Bulls retarget 0.7000

The Australian Dollar (AUD) has regained some composure at the beginning of the week, prompting AUD/USD to set aside two daily pullbacks in a row while reclaiming the key 0.6900 milestone at the same time.

Indeed, the resurgence of the bid bias in the Aussie has come on the heels of fresh weakness hurting the US Dollar, as market participants continue to evaluate reignited speculation of a probable US-Iran deal, which should put an end to the conflict in the Middle East. 

Looking at the broader picture, AUD/USD remains below its key 200-day SMA near 0.7060, with a convincing recovery above that level needed to improve the near-term outlook. In the meantime, persistently high inflation in Oz should help limit the scope for a deeper correction along with the ongoing cautious stance from the Reserve Bank of Australia (RBA).

Australia's resilience faces an inflation test

Australia’s economy continues to compare favourably with many of its G10 peers, supported by domestic demand and positive economic growth. Persistent inflation also supports the RBA’s cautious, data-dependent policy stance.

However, business activity seems to have lost some momentum after preliminary data showed the Purchasing Managers’ Index (PMI) for Manufacturing improving marginally to 49.5 in September and easing to 47.8 when it comes to Services, from 49.6 and 51.9, respectively.

Trade data provided another positive signal after the September trade surplus widened to A$2.826 billion, adding to the A$0.184 billion surplus registered in the previous month (revised from A$0.495 billion).

Growth figures were less encouraging, however. Indeed, the Gross Domestic Product (GDP) expanded by 0.4% QoQ in the second quarter of 2026, up from 0.3%, while annual growth came in at 2.1%, down from the previous 2.5% yearly expansion.

The labour market, however, disappointed investors in September after the Unemployment Rate held steady at 4.7% (August’s print was revised higher to 4.7% from 4.6%), while the Employment Change shrunk by 39.3K, reversing August’s 29.3K increase (revised from 39.5K).

Inflation seems to have regained some impulse after the latest data showed the most-watched Trimmed Mean CPI came in at 3.7% over the last twelve months in Q3, while the headline CPI held steady at 3.9% from a year earlier.

The Melbourne Institute’s Consumer Inflation Expectations measure reinforced that trend after ticking higher to 5.3% in October.

The figures leave the RBA’s inflation task incomplete. Policymakers expect inflation to return to target only in early 2028, keeping the emphasis on patience rather than an imminent policy pivot.

China's recovery is still missing a higher gear

China is providing stability for the Australian economy, but not the growth impulse that has underpinned the Australian Dollar during previous expansions. However, this situation appears to be gradually improving.

Indeed, the Chinese economy expanded by 4.5% YoY in the July-September period, while Industrial Production grew by 5.5% YoY and 5.3% YDT. In the same direction, the latest trade data showed a surplus of $133.53 billion in September, as both imports and exports posted strong gains. Reinforcing this picture, consumer spending remained solid after Retail Sales expanded by 1.1% over the last twelve months.

Pouring cold water over that optimism, business surveys offered a mixed picture: the National Bureau of Statistics (NBS) reported that both the Manufacturing PMI and the Services PMI returned to the contraction territory last month after easing to 49.3 (from 50.1) and 49.7 (from 50.2), respectively. In the opposite direction, although also showing some loss of momentum, private measures like RatingDog remained in expansionary territory, with Manufacturing at 52.0 (from 52.1) and Services at 50.8 (from 51.6).

Disinflationary pressures seem to have resumed in October, with the CPI gaining 0.7% from a year earlier (from 0.9%), while prices came in flat on a monthly basis (from a 0.2% gain). In addition, Producer Prices rose more than initially estimated by 5.7% over the previous twelve months from the 5.0% increase recorded in the previous month.

Back to the central banks’ space, 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, matching the broad consensus.

Taken together, the latest Chinese data offer some encouragement for Australia and the AUD, although the recovery has yet to develop the kind of momentum that could provide the currency with a more lasting and convincing boost.

RBA tightens again but is in no rush to commit

In line with initial estimates, the RBA raised its cash rate by 25 basis points to 4.85% in a 6-3 decision after sharply lifting its inflation forecasts. That said, the headline CPI is now expected to peak at 4.5% and stay above 3% until late 2027, while the Trimmed-mean inflation is forecast at 3.6% in Q4 2026, easing only gradually thereafter.

Furthermore, the central bank said price pressures were no longer confined to a few areas, with domestic capacity constraints, rents, services and durable goods all contributing, while higher fuel costs were beginning to feed through to other prices. Additionally, the AI investment boom is adding further pressure to technology-related goods and global demand.

In her usual press conference, Governor Michele Bullock said the hike was needed, although she stressed that the economy was not showing signs of cracking and that Australia was not facing a wage-price spiral.

Bullock left the next move open, as another hike may be required, but the Board wants to see how the latest hike works through the economy before deciding. For now, the RBA is accepting some weaker growth and a higher unemployment rate as the price of preventing today’s inflation from becoming tomorrow’s problem.

AUD/USD: The road higher remains difficult

Baseline outlook

A further sidelined mood should not be ruled out in the short-term horizon. In the meantime, and looking at the broader picture, the pair should face a steady chance of further declines while below the 200-day SMA around 0.7060.

The resumption of the bullish bias will likely require a strong catalyst, namely a sustained improvement in risk appetite trends or renewed and persistent weakness in the Greenback.

Upside scenario

A sustained improvement in risk appetite could help AUD/USD regain the 200-day SMA near 0.7060. Beyond that, the weekly top at 0.7140 (September 21) would emerge as the next hurdle, ahead of the 2026 peak around 0.7280 (May 6).

Downside scenario

In case bears regain control of sentiment surrounding the Aussie, there should be initial support at the November valley of 0.6854 (November 6-9). A breach below this level would increase the likelihood of a retest of the March bottom at 0.6833 (March 30).

Aussie bears dig in as options flash warning signs

According to the latest Commodity Futures Trading Commission (CFTC) report, non-commercial bearish positioning in the Australian Dollar was broadly unchanged in the week ending November 3. Further data saw the four-week change improved significantly to -30,869 from -65,076, suggesting that the broader pace of bearish positioning has started to ease.

Moreover, open interest increased to around 328.6K contracts, or two-week highs. That said,  with net shorts deepening slightly alongside higher participation, the latest move points to a modest addition of fresh bearish exposure. Still, the relatively small weekly change suggests that traders are becoming less aggressive in extending their short positions.

Speculative exposure was virtually unchanged at -39.4%, while its percentile edged up to 21.4. The Net Position Percentile remained at 0.0, confirming that speculative net shorts are at an extreme historical level. However, the relatively low exposure percentile suggests that positioning is less exceptional when measured against open interest.

Options traders turn sharply more defensive

The options market, meanwhile, is sending a considerably more bearish message.

AUD/USD one-month 25-delta Risk Reversals fell to -1.387 volatility points on November 6, sitting at the 15.6th percentile of its five-year distribution and reflecting a pronounced premium for downside protection.

The speed of the repricing is particularly striking: Risk Reversals deteriorated by 0.452 volatility points over the past week, a move ranking at just the 4.4th percentile of comparable five-year changes. The three-month decline of 0.845 volatility points is similarly unusual, ranking at the 5.2nd percentile.

The deterioration has been accompanied by a sharp decline in spot, which has recently revisited the 0.6860 region. However, options have become more defensive than the currency's performance alone would normally suggest.

Over the past month, AUD/USD retreated more than 1.30%, a move that would historically imply a decline of roughly 0.123 volatility points in Risk Reversals. The actual deterioration was 0.335, leaving a negative residual of 0.212 volatility points.

That residual is in the 22nd percentile of the historical out-of-sample distribution. Thus, downside protection has repriced more aggressively than the spot decline would usually justify, although the deviation is not historically extreme.

Bearish confirmation, but crowded positioning raises the stakes

The interplay of futures positioning, spot performance and options pricing is a marked departure from late October when AUD/USD was surging despite deeply bearish speculative positioning.

Since then, that divergence has disappeared. The pair is falling again, options traders are paying a higher premium for downside protection, and speculative positioning in futures is now at its most bearish level in five years.

The current environment points to a bearish confirmation – crowded, which is the confluence of spot weakness, defensive options pricing and historically extended short positioning.

There is, however, an important difference between the two markets. According to the latest CFTC figures, while options traders have greatly increased their demand for downside protection, the pace of new bearish positioning in futures has slowed significantly.

This puts AUD/USD in an awkward position. The signals are suggesting further downside pressure; however, the sheer level of short exposure could also mean the potential for a sharp reversal if sentiment improves or shorts start to close positions.

What’s next for the Aussie

US Dollar dynamics, global risk sentiment, and geopolitical developments remain the main near-term drivers of AUD/USD.

Next on tap on the domestic docket will be the release of confidence gauges tracked by both Westpac and NAB. On the US calendar, all the attention shifts to the release of crucial inflation figures tracked by the Consumer Price Index (CPI).

Beyond that, the main risks are expected to emerge from China, a persistently cautious Fed, a deterioration in investor risk appetite or a change in the RBA’s current policy stance.

Any of these developments could quickly alter the outlook for the Australian currency.

Technical analysis

In the daily chart, AUD/USD trades at 0.6914, keeping a bearish bias as it holds beneath the 100-day, 55-day and 200-day simple moving averages (SMAs) clustered between roughly 0.7028 and 0.7057. The pair has bounced off oversold conditions, with the Relative Strength Index (14) indicator recovering toward the 40 area while the Average Directional Index (14, 14) slips toward 25, which suggests waning trend strength but still leaves the broader downside pressure intact while price remains capped below these key averages.

On the topside, initial resistance is seen at 0.7028 from the 100-day SMA, followed by the 55-day SMA at 0.7052 and the 200-day SMA at 0.7057, before a stronger barrier at the horizontal level near 0.7079; above that, 0.7278 and 0.7283 form a wider supply zone ahead of 0.7661. On the downside, immediate support emerges at the horizontal floor around 0.6833, with deeper levels at 0.6660 and 0.6593, while 0.6414 and 0.6373 mark a more distant bearish target area if selling pressure resumes.

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

Near-term outlook

In terms of the forecast, a bearish scenario for the pair appears the most favourable option, but the increasingly crowded bearish trade demands some caution.

The AUD has been supported by sticky inflation in Australia and the RBA’s desire to maintain tight monetary policy, but weakening domestic momentum, a patchy recovery in China, and ongoing demand for the US Dollar may limit any major revival.

Currently, the important dividing line is the 200-day SMA around 0.7060: a prolonged rebound above that level would enhance the technical picture and put the 0.7100 barrier back into focus, while further selling might expose recent lows in the mid-0.6800s.

For now, the risk balance remains skewed to the negative, with speculative shorts already at record extremes and options markets pricing in higher downside risks, but an improvement in global mood or further Greenback weakening may spark a dramatic short-covering rally.