Australian Dollar Price Forecast: Further choppiness remains in place
- AUD/USD reverses two consecutive daily advances, holds on near 0.6500.
- The US Dollar resumes its decline, reaching new monthly lows following data.
- Australia’s Consumer Confidence improves to 103.8 in November, Westpac said.
The Australian Dollar (AUD) faces some renewed donwside pressure on Tuesday, prompting AUD/USD to set aside two daily gains in a row and come close to the key 0.6500 contention zone.
The pair’s correction comes despite the US Dollar (USD) receding to monthly troughs, as poor data from the labour market reignited speculation that the Federal Reserve (Fed) could further extend its rate-cutting mood in the next few months.
Australia’s economy: steady, but showing some wear
Australia’s economy isn’t racing ahead, but it’s holding up better than many expected. The October PMIs painted a mixed picture: manufacturing slipped back below the 50 line to 49.7 (from 51.4), while services edged higher to 53.1 (from 52.4).
Retail Sales rose 1.2% in June, and the September trade surplus widened sharply to A$3.938 billion. Business investment picked up in Q2, helping GDP grow 0.6% QoQ and 1.1% YoY, not spectacular, but solid enough.
That said, there are hints of strain in the labour market. The unemployment rate ticked up to 4.5% in September (from 4.3%), and job growth slowed to 14.9K. It’s not a red flag yet, but it does suggest hiring momentum is cooling. Traders will be watching this week’s October jobs data for confirmation.
RBA stays in wait-and-see mode
The Reserve Bank of Australia (RBA) kept rates unchanged at 3.60% for the second meeting in a row, no surprises there. The tone was calm and measured: no urgency to move in either direction.
The RBA noted that inflation is still a touch sticky, and the labour market remains tight despite that small rise in unemployment. Governor Michele Bullock described policy as “pretty close to neutral,” signalling little desire to tighten or ease further for now.
She also reminded markets that the 75 basis points of rate cuts already delivered haven’t fully filtered through the economy yet. Policymakers want to see how demand shapes up before making their next call.
Markets are currently pencilling in nearly 4 basis points of easing by the December 9 gathering and just over 13 basis points by early 2026, in other words, not much change expected any time soon.
China: still the wild card
Australia’s outlook continues to hinge on how things unfold in China. Chinese GDP grew 4.0% year-on-year in Q3, while Retail Sales were up 3.0%. The RatingDog Manufacturing PMI eased slightly to 50.6, and the Services PMI dipped to 52.6 in October, both hinting that momentum may be softening.
Trade data also pointed to a narrower surplus, shrinking from $103.33 billion to $90.45 billion in September. On a brighter note, consumer prices finally turned positive in October thanks to holiday demand: headline CPI rose 0.2% YoY, beating forecasts and marking a solid recovery from September’s 0.3% decline. Core CPI also firmed to 1.2% from a year earlier, matching February’s peak.
Meanwhile, the People’s Bank of China (PBoC) left its Loan Prime Rates (LPR) steady at 3.00% (one-year) and 3.50% (five-year) in October, just as expected.
Technical picture
AUD/USD seems to have met some decent resistance around the 0.6540 zone, where also sits its temporary 100-day SMA.
If bulls push harder, spot could embark on a potential trip to the October top of 0.6629 (October 1), prior to the 2025 ceiling of 0.6707 (September 17). Once the latter is cleared, a test of the 2024 high at 0.6942 (September 30) could start emerging on the horizon ahead of the 0.7000 milestone.
In contrast, the key 200-day SMA at 0.6450 should offer initial contention, closely followed by the October trough at 0.6440 (October 14), the August base at 0.6414 (August 21), and the June valley of 0.6372 (June 23).
In addition, momentum indicators lose some shine: the Relative Strength Index (RSI) eases toward the 49 zone, indicating some loss of bullish impetus, while the Average Directional Index (ADX) near 14 suggests a still weak trend.
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The takeaway
For now, AUD/USD remains stuck in its well-worn 0.6400–0.6700 range, waiting for a clear catalyst that could emerge from Chinese data, the Fed’s next move, the RBA’s tone, or a broader shift in US–China sentiment.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
