Australian Dollar Price Forecast: Focus now shifts to 0.7200

Sticky domestic inflation, together with a Reserve Bank of Australia (RBA) that still shows little appetite to soften its hawkish stance, continues to offer a supportive backdrop for the Australian Dollar (AUD). This combination keeps the door open for further upside in AUD/USD while also helping to cushion the downside. That said, ongoing geopolitical tensions are likely to keep rallies somewhat capped for now.

The Australian Dollar extends its rebound on Wednesday, with AUD/USD approaching the key 0.7200 barrier for the first time since the summer of 2022 and advancing for the fourth day in a row.

The move higher in spot comes despite another firm performance of the US Dollar (USD), as investors keep assessing the latest US inflation data and prudence prevails amid the unabated conflict in the Middle East.

Australia: solid foundations for the Aussie

Australia’s macro backdrop continues to provide a fairly firm floor for the Aussie.

Growth remains respectable, inflation is still proving sticky, and the RBA continues to lean on the hawkish side. For currency markets, that combination tends to keep a meaningful cushion under the AUD.

In addition, February’s final Purchasing Managers' Index (PMI) readings reinforced that narrative. Manufacturing came in at 51.0 and Services at 52.2, both comfortably in expansion territory and broadly consistent with an economy that is still growing at a steady pace.

Consumer activity is also holding up better than many had expected, as retail spending remains resilient and the trade balance continues to deliver support, with the surplus reaching A$2.631 billion in January.

At the broader level, the economy is still expanding at a healthy rhythm. That said, the Gross Domestic Product (GDP) grew 0.8% QoQ in Q4, and 2.6% YoY, comfortably above the bank’s earlier projections.

The labour market is starting to cool slightly, but there are no signs of a sharp deterioration after the Employment Change increased by 17.8K in January and the Unemployment Rate held steady at 4.1%. In other words, the slowdown still looks gradual and orderly rather than abrupt.

Inflation: cooling, but not comfortably yet

Inflation remains the key issue for policymakers. Indeed, January’s headline Consumer Price Index (CPI) held at 3.8% YoY, slightly above expectations, while the Trimmed Mean edged up to 3.4% YoY. In light of these results, the direction is still lower, but the pace of disinflation is proving slower than policymakers would ideally like.

From the RBA’s perspective, the job is clearly not finished yet. The central bank continues to expect inflation to peak around Q2 2026 before gradually moving back toward the midpoint of the 2–3% target band by mid-2028.

In short, inflation is easing, but the process remains uneven and still requires patience from policymakers.

China: more stabiliser than growth engine

China’s role in Australia’s outlook has also shifted somewhat.

Rather than acting as a powerful engine for global growth, the Chinese economy currently looks more like a stabilising force.

At first glance, the headline growth picture still looks relatively solid, as in the final quarter of 2025, the Gross Domestic Product (GDP) expanded by 4.5% YoY. Retail Sales also rose by 0.9% YoY in December, while trade data were strong, with the surplus reaching $213.62 billion in the January–February period as exports rose 21.8% and imports increased 19.8%.

Surveys regarding business activity, however, offer a more nuanced picture. The official Purchasing Managers' Index (PMI) readings from the National Bureau of Statistics (NBS) remained in contraction territory in February, with Manufacturing at 49.0 and Services at 49.5.

Private surveys appear somewhat stronger: the RatingDog indicators remained comfortably in expansion territory in February, with Manufacturing at 52.1 and Services at 56.7, both modestly higher than the previous month.

Inflation pressures also remain subdued: the Consumer Price Index (CPI) ran at just 0.2% YoY, while the Producer Price Index (PPI) remained in deflation at -1.4% YoY. Meanwhile, the People’s Bank of China (PBoC) kept the one-year and five-year Loan Prime Rate (LPR) unchanged at 3.00% and 3.50%, as broadly anticipated.

For the Australian currency, the takeaway is fairly straightforward: China is no longer acting as a major drag on the outlook, but it is not yet providing a powerful growth impulse either.

RBA: restrictive stance remains in place

For now, the RBA remains almost entirely focused on inflation dynamics.

There is around a 75% probability of another quarter-point rate hike at the March 17 meeting, while investors see nearly 74 basis points of tightening for the current year.

Following the latest rate hike, Governor Michelle Bullock noted that financial markets have remained broadly orderly despite rising tensions in the Middle East. For Australia, the implications are mixed. As a net energy exporter, higher commodity prices can support national income, although a prolonged geopolitical shock could still weigh on household consumption.

Bullock also reiterated that inflation remains elevated and that the Board’s priority is to keep inflation expectations firmly anchored. Policymakers will therefore continue to assess incoming data carefully, with each meeting effectively remaining live.

She also acknowledged that if labour market tightness persists, the unemployment rate may need to rise somewhat in order to help bring inflation back under control.

Positioning: bullish exposure keeps building

The latest Commodity Futures Trading Commission (CFTC) data for the week ending March 3 show speculative traders continuing to add to their bullish exposure to the AUD.

Non-commercial net long positions increased to around 67.8K contracts, marking a fresh multi-year high. This suggests speculators are still leaning into the trade rather than trimming exposure after the recent rally.

Market participation also increased, as open interest rose to roughly 262.3K contracts, indicating that the rise in net longs likely reflects fresh positioning entering the market rather than simple short covering.

Overall, speculative sentiment remains clearly constructive.

That said, with net longs already near multi-year highs, the market could become more sensitive to shifts in the macro narrative. Crowded trades tend to react quickly when the underlying story starts to change.

What’s next for AUD/USD?

Near term: spot will likely continue taking its cues from developments in the US Dollar space and the broader geopolitical backdrop. Strong US data, changes in tariff policy, or further escalation in Middle East tensions could quickly reshape the market narrative.

Risks: the AUD is still a classic high-beta currency and tends to struggle when global risk appetite deteriorates, when China underperforms, or when expectations around the US Dollar shift abruptly.

Technical landscape

In the daily chart, AUD/USD trades at 0.7153. The near-term bias is bullish as spot extends above the 23.6% Fibonacci retracement at 0.6976 measured from the 0.6421 low to the 0.7147 high, reinforcing a sustained breakout over the prior corrective band. Price holds well above the 55-, 100- and 200-day Simple Moving Averages (SMAs), which all trend higher and confirm an established uptrend backdrop. The Relative Strength Index (RSI) holds above 60, indicating firm positive momentum, while the Average Directional Index (ADX) eases from elevated readings but remains above 25, signalling a still-directional market rather than a range phase.

Immediate resistance is seen at 0.7158, the nearby horizontal cap, followed by 0.7283 ahead of the higher barrier at 0.7661. On the downside, initial support emerges at 0.7040–0.7070 around recent closes, with the horizontal level at 0.6944 aligning near the 23.6% retracement at 0.6976 to form a key support zone. A deeper pullback would expose 0.6897, with subsequent cushions at 0.6660 and 0.6593, where earlier congestion and lower Fibonacci levels converge with the rising medium-term SMAs. As long as the pair holds above the 0.6940 area, the path of least resistance remains to the upside.

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

Bottom line: cautiously constructive

For now, Australia’s relatively solid domestic fundamentals and a still-hawkish RBA should keep the broader bias for AUD/USD constructive.

That said, confidence remains conditional. The Aussie typically performs best when global risk sentiment improves. However, if geopolitical tensions intensify or market volatility rises again, the Greenback could quickly regain the upper hand and weigh on the pair.