Australian Dollar Price Forecast: Further range bound on the cards

AUD/USD has been having trouble finding its way again in the previous few days after it hit fresh highs of around 0.7150 earlier this month. The Reserve Bank of Australia's (RBA) hawkish stance, rising inflation, and solid domestic fundamentals all support the positive prognosis for the Aussie Dollar (AUD) in the meanwhile.

The Australian Dollar (AUD) manages to partially set aside Monday’s pessimism, motivating AUD/USD to stage an acceptable comeback and revisit the 0.7070-0.7080 band on turnaround Tuesday.

The pair’s daily bounce comes despite the modest advance in the US Dollar (USD) in a context where trade uncertainty remains on the rise in response to Friday’s US SCOTUS ruling against President Trump’s global tariffs.

Australia: cooling, but not cracking

Australia’s economy is clearly moderating, but the slowdown still looks orderly. This is not an economy rolling over. It is one stepping off the accelerator after running a little too warm.

The February preliminary Purchasing Managers' Index (PMI) surveys reinforce that view, with Manufacturing at 52.0 and Services at 52.2 remaining comfortably in expansion territory. Not booming, but far from contraction.

In addition, retail spending is holding up, the trade surplus widened to A$3.373 billion at the end of 2025, and Gross Domestic Product (GDP) expanded 0.4% QoQ in Q3, lifting annual growth to 2.1%. That broadly matches what the RBA had pencilled in.

The labour market is steady rather than spectacular. Employment Change rose 17.8K in January, slightly below expectations, while the Unemployment Rate held at 4.1%. That is consistent with gradual cooling, not stress.

Inflation remains the fault line.

The Consumer Price Index (CPI) rose 3.8% YoY in December, and the Trimmed Mean came in at 3.3% YoY and 3.4% QoQ in Q4, still above the midpoint of the RBA’s 2% to 3% target band. More strikingly, the Melbourne Institute’s Consumer Inflation Expectations survey jumped to 5.0% in February, the highest since August 2023. That is not a number policymakers can casually dismiss.

Furthermore, credit growth supports the idea that policy is restrictive but not suffocating, as Home Loans rose 10.6% QoQ in Q4 and Investment Lending increased 7.9%. Financial conditions are tight enough to cool demand but not tight enough to stall it.

China: stabiliser, not accelerator

China continues to act as a steady anchor for the Australian Dollar, though it is hardly providing rocket fuel.

The economy expanded 4.5% YoY in Q4 and 1.2% QoQ according to the latest GDP figures, while Retail Sales rose 0.9% YoY in December. Respectable, but not transformative.

The January PMI split is revealing, however, as the Official Manufacturing and Non-Manufacturing slipped into contraction at 49.3 and 49.4, respectively. and the Caixin Manufacturing and Services remained in expansion at 50.3 and 52.3, respectively. Larger state-linked sectors appear softer; smaller private firms are somewhat more resilient.

Additional data saw the trade surplus widen to $114.1 billion in December, yet inflation remains subdued after the CPI rose just 0.2% YoY and Producer Prices fell 1.4% YoY. That is not reflation; it is lingering disinflation.

On the policy front, the People’s Bank of China (PBoC) left the one year and five year Loan Prime Rate (LPR) unchanged at 3.00% and 3.50%, respectively. The tone remains calm and supportive rather than aggressive. Stability over stimulus.

For the Aussie, that means China is not a headwind, but neither is it an ignition source.

RBA: restrictive, not reckless

Earlier this month, the RBA lifted the Official Cash Rate (OCR) to 3.85%, underlining that inflation remains the priority.

Updated projections suggest price pressures will stay above target for much of the forecast horizon. The Minutes were explicit. Without the latest hike, inflation would likely have remained above target for too long. Policymakers judged that risks had shifted enough to justify tightening.

But this is not autopilot. There is no pre-commitment. The path remains data dependent.

Markets are pricing close to 37 basis points of additional tightening this year. Not aggressive, but enough to maintain a yield floor under the Australian Dollar.

Positioning: rebuilding, quietly

Commodity Futures Trading Commission (CFTC) data show non commercial traders lifted net longs to nearly 46K contracts, the strongest since late October 2017.

This does not look like froth. It looks like exposure is being rebuilt.

Open interest rose to around 256.2K contracts, pointing to improving conviction without obvious crowding. There is still room to extend if sentiment firms further.

Investors are stepping back into the Aussie, cautiously but deliberately.

What matters now

Near term: the US Dollar still sets the tempo. Strong US data, renewed tariff rhetoric or geopolitical noise can quickly shift AUD/USD. Domestically, upcoming inflation figures are crucial. If price pressures remain sticky, markets may need to reassess how much further the RBA might tighten.

Risks: the Aussie remains a high beta currency. If global risk appetite deteriorates, if China wobbles, or if the Greenback stages a meaningful rebound, the unwind could be swift.

Technical landscape

In the daily chart, AUD/USD trades at 0.7065. The near-term bias is mildly bullish as spot holds well above the rising 55-day and 100-day Simple Moving Averages (SMAs) near 0.6800, while the 200-day SMA around 0.6600 underpins the broader uptrend. Price has reclaimed the 38.2% Fibonacci retracement at 0.6870 and now trades between the 23.6% retracement at 0.6976 and the swing high region, suggesting buyers maintain control within the current leg measured from the 0.6421 low to the 0.7147 high. The Relative Strength Index (RSI) hovers around 60, consistent with positive but not overstretched momentum, while the Average Directional Index (ADX) eases from elevated readings above 40, indicating a still-established trend that is losing some intensity rather than reversing.

Initial support is seen at 0.6976, where the 23.6% retracement aligns with a recent consolidation area, followed by the 0.6897 horizontal level near the prior breakout zone. A deeper pullback would expose support at 0.6660 and then 0.6593, which sit closer to the rising medium- and long-term SMAs and are expected to attract dip-buying interest if tested. On the upside, immediate resistance comes in at the recent swing high and Fibonacci ceiling at 0.7147, just beneath the horizontal barrier at 0.7158. A daily close above this band would open the way toward 0.7283, with a further extension targeting the higher resistance level at 0.7661 if bullish momentum re-accelerates.

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

Bottom line: constructive, but not complacent

Australia’s macro backdrop remains resilient. The RBA is restrictive. Positioning is improving. China is stable enough.

That keeps the broader bias tilted to the upside.

But this is not a defensive currency. It performs best when global sentiment is constructive and struggles when risk turns sour. For now, dips are likely to attract buyers as long as the US Dollar stays contained.

If that changes, so does the narrative.