Australian Dollar Price Forecast: Further consolidation on the cards

Waiting for a clearer signal

Directional bias: while above the 200-day SMA around 0.6930, spot should maintain the neutral-to-bullish stance, although a persistent inability to advance north of 0.7000 leaves spot exposed to a correction.

Preferred approach: Patience may have a better risk-reward profile than chasing the pair just below resistance. A clear setup would be a verified break above the 0.7100 mark or a retreat that stays near the 200-day SMA.

Bullish trigger: A sustainable move beyond 0.7100, ideally supported by firm Australian data, stronger expectations of another RBA rate increase, lower US yields or a wide-spread improvement in risk appetite.

Bearish trigger: Again failing at 0.7000 with USD strength or broad weakness in market sentiment.

Key invalidation level: Failure at the daily close below the 200-day SMA breaks the larger constructive structure and raises the risk of a deeper retracement on the near-term horizon

Three paths out of the 0.7000 crossroads

Base case: More sidelined trading might prompt AUD/USD to navigate just below 0.7100 and the 200-day SMA while traders look for a strong enough reason.

Australia’s relatively solid domestic fundamentals and the RBA’s cautious stance should discourage aggressive selling. At the same time, persistent demand for the US Dollar (USD) and geopolitical uncertainty could prevent an immediate breakout.

Until either boundary gives way, spot may be better treated as a side-lined trade than a convincing directional move

Bull case: Buyers keep the upper hand above 0.7100

A strong break above 0.7100 would suggest buyers are more convinced that a sustainable move higher is now achievable.

The breakout would carry greater conviction if supported by:

• Firmer-than-expected Australian data releases.
• Sticky inflation figures.
• Increased expectations of another RBA rate hike.
• Lower US yields and a softer US Dollar.
• An improvement in risk-linked sentiment.

Under this scenario, there is a minor target at the weekly top at 0.7088 (June 15), ahead of the next important medium-term target at 0.7200 (May 29), all preceding the 2026 ceiling near 0.7280.

The sizeable build-up of speculative AUD shorts could add fuel to the move if a confirmed breakout forces bearish traders to unwind their positions.

Bear case: Another rejection opens the door to 0.6900

A fresh failure around 0.7000 could bring sellers back into the market, particularly if the Greenback regains momentum or global risk appetite deteriorates.

The next major test would then be the 200-day SMA beyond the 0.6900 level. A daily close below this area would damage the wider bullish structure and increase the probability of a deeper correction.

Once that support gives way, previous resistance and consolidation zones below 0.6900 could return to focus.

Australia’s economy continues to hold its ground

Australia’s domestic backdrop remains relatively healthy, supported by firm demand, positive growth and a resilient labour market.

July business surveys reinforced that picture. The Manufacturing PMI improved to 52.0 from 51.5, while the Services PMI rose to 53.6 from 50.5, leaving both sectors comfortably in expansionary territory.

The latest data from the labour market were also encouraging: the Unemployment Rate held steady at 4.4% in June, while the Employment Change jumped by 76.3K following a revised 44K increase in May.

The picture appears uniformly positive after Australia recorded an A$1.929 billion trade surplus in June, reversing May’s A$2.367 billion deficit. Economic growth also slowed to 0.3% QoQ in the January-March period, down from 0.9%, while annual growth held at 2.5%.

Overall the figures suggest a resilient economy but perhaps not strong enough on its own to trigger a sustained breakout in AUD/USD.

Inflation leaves the RBA with unfinished business

Australian headline inflation eased to 3.9% in the second quarter from 4.1%. Underlying price pressures, however, remained uncomfortable. Both the Trimmed Mean and Weighted Median measures rose to 3.6% from 3.5% in the previous quarter.

Consumer inflation expectations offered some relief, falling to 4.7% in July from 5.5%, according to the Melbourne Institute. Even so, inflation remains too high for the RBA to declare victory.

The central bank left its Official Cash Rate (OCR) unchanged at 4.35% in June and maintained a cautious message. Policymakers warned that further tightening could still be required if inflation proves more persistent than expected.

Governor Michele Bullock struck a more balanced tone. While keeping the possibility of another rate increase alive, she suggested there was no immediate need to tighten again as the economy was broadly evolving in line with expectations.

Markets expect the RBA to remain on hold at its August meeting while continuing to price the possibility of additional tightening before year-end. So far, markets have pencilled in roughly 13 basis points of extra tightening by the turn of the year.

That stance provides the AUD with some domestic support, but it is not necessarily enough to trigger an immediate rally. Further gains may require incoming data to strengthen the case for another rate increase.

China steadies but offers little additional lift

China remains an important influence on the Australian currency, although it is currently providing stability rather than a powerful tailwind.

The Chinese economy expanded by 4.3% YoY in the April-June period, Industrial Production rose by 5.3% in the year to June, and Retail Sales increased by a more modest 1.0%.

Business surveys suggest that activity is stabilising. The official Manufacturing and Services PMIs remained slightly above the 50 threshold, while private-sector gauges continued to signal expansion.

China’s trade surplus also widened to $125.62 billion in June from $105.4 billion, supported by stronger imports and exports.

Meanwhile, the People’s Bank of China (PBoC) left its Loan Prime Rates (LPR) unchanged, keeping the one-year rate at 3.00% and the five-year rate at 3.50%.

China is therefore neither delivering a major boost nor creating a significant drag. Unless the data reveal a clearer acceleration or deterioration, Chinese releases may generate short-term volatility without establishing a lasting direction for the pair.

Bears take a breather as speculative shorts are trimmed

Speculative positioning on the Australian Dollar improved in the week to August 4. Indeed, Commodity Futures Trading Commission (CFTC) data showed net short holdings in non-commercial positions narrowed to 33.2K contracts from 40.0K in the prior week. The +6.8K contract weekly move was the first significant drop in bearish exposure in some weeks, as investors seemed to be reducing short positions after a prolonged period of selling.

The move came as market activity rose further, with open interest climbing to just over 240K contracts from around 230K contracts. Meanwhile, Speculative Exposure improved to -13.8% (from -17.4%), suggesting that negative conviction has softened even as new players continue to join the market.

The wider trend is also indicative of a slowdown in negative momentum, with the 4-week change jumping to -8.5K contracts from -22.3K before, suggesting the extreme bearish repositioning that has dominated June and July has mostly run its course. The Net Position Percentile, however, recovered to 74.3, and the Speculative Exposure Percentile jumped to 80.8, suggesting that while positioning is still historically negative, the market has moved away from the more extreme levels seen recently.

Overall, the latest CFTC data suggests that speculative speculators are still short the Aussie, but the tone is much less bearish. The drop in the net short, along with the rise in 4-week momentum, suggests that the long unwind of shorts is beginning to change, with future positioning likely to become more data-dependent and global risk sentiment-dependent.

What’s next for AUD?

With the RBA event in the rearview mirror, investors are likely to closely follow the message from Governor Bullock on Friday.

Technical analysis

On the daily chart, AUD/USD is trading at 0.7057, showing a bullish near-term bias as it is above the 200-day simple moving average (SMA) at 0.6934 and the 55-day SMA at 0.7005, while it is also close to the 100-day SMA at 0.7056, which acts as an immediate pivot. The Relative Strength Index (14) near 58 indicates positive upside momentum that is not overextended, while the subdued Average Directional Index (14) around 10 suggests a trend that is advancing but not yet in a strong directional phase.

On the topside, initial resistance emerges at 0.7079, ahead of a broader supply cluster between 0.7278 and 0.7283, with a more distant cap at 0.7661. On the downside, immediate support is reinforced by the 100-day SMA at 0.7056, followed by the 55-day and 200-day SMAs at 0.7005 and 0.6934, respectively, before a deeper structural floor at 0.6833; below there, longer-term supports are aligned at 0.6660, 0.6593, 0.6414 and 0.6373.

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

The line in the sand remains the 200-day SMA

AUD/USD retains a constructive medium-term structure above its 200-day SMA, but the immediate outlook remains uncertain while the pair struggles to secure a foothold well above 0.7000.

The most attractive setup remains conditional: confirmed acceptance above 0.7100 would favour further gains and could trigger a positioning-driven short squeeze. Another rejection, however, would leave the pair exposed to a breach below 0.7000.

Until one of these boundaries breaks, AUD/USD remains caught between supportive Australian fundamentals and an external backdrop still dominated by the US Dollar, geopolitical uncertainty and only moderate support from China.