Australian Dollar Price Forecast: Near-term momentum remains bullish
- AUD/USD adds to its ongoing rally, reaching three-week highs near 0.6570.
- The US Dollar maintains its multi-day decline in place despite higher US yields.
- Australian Business Inventories contracted 0.9% QoQ in Q3.
AUD is pushing higher again on Monday, with AUD/USD chalking up a seventh straight daily gain and breaking comfortably above the 0.6500 zone. From here, traders are eyeing a potential run toward the November highs around 0.6580.
The Aussie’s solid form is mostly down to ongoing weakness in the US Dollar (USD), as markets keep adjusting to the idea that the Federal Reserve (Fed) could start easing policy over the coming months.
Australia: Steady steps, not a sprint
Australia’s economic story right now isn’t about fireworks, it’s about steady, incremental progress. Early November PMI readings helped calm nerves, with Manufacturing climbing back into expansion at 51.6 after sitting below the line, and Services improving slightly to 52.7. Consumers haven’t tapped out either: Retail Sales were up 4.3% YoY in September, and the trade surplus widened to A$3.938 billion. Business investment did stumble in Q3, slipping 0.9% QoQ, but that looks more like a bump in the road than a shift in direction.
Growth as a whole is still moving forward. GDP expanded 0.6% QoQ and 1.1% YoY, not headlines that grab attention, but enough to reassure policymakers that momentum is holding. The labour market is doing its part too, with October’s Unemployment Rate easing to 4.3% and Employment Change jumping by 42.2K, hinting that some earlier soft patches may be fading.
Where things remain complicated is inflation: October CPI surprised on the upside, with headline inflation hitting 3.8% YoY, the highest level in roughly 17 months, driven by persistent pressures in housing, food, and recreation. The trimmed mean CPI, the RBA’s preferred gauge, also overshot expectations at 3.3% YoY. It was a notable release in another sense as well: The first full monthly CPI dataset since the Australian Bureau of Statistics (ABS) moved away from publishing inflation only on a quarterly schedule.
China: Helpful tailwind, but no rescue mission
Across the water, China continues to be a key influence on Australia’s outlook, although its own recovery still looks uneven. The Q3 GDP grew by 4.0% YoY, and Retail Sales in October rose 2.9% YoY, but industry momentum has been softer, as Manufacturing PMI pulled back to 50.6, Services slipped to 52.6, and Industrial Production came in weaker than hoped at 4.9% YoY. The trade picture didn’t help, with the surplus shrinking sharply in September, another sign of lingering demand challenges.
There was at least a bright spot in prices: Headline CPI finally turned positive at 0.2% YoY, helped along by Golden Week tourism, while core CPI edged up to 1.2%. Still, the People’s Bank of China (PBoC) kept Loan Prime Rates (LPR) steady at 3.00% for the one-year and 3.50% for the five-year, signalling policymakers aren’t ready to unleash major stimulus.
So while China remains supportive in the background, especially for commodities, it’s far from being the engine that can single-handedly power the Australian Dollar higher.
RBA: Keeping steady and staying patient
The RBA held the Cash Rate at 3.60% in early November, as widely expected. Policymakers aren’t ruling out more tightening, but they’re definitely not entertaining rate-cut speculation yet.
Inflation remains too sticky, and the labour backdrop is still tight. Governor Michele Bullock has repeated that policy is “close to neutral”; it just needs more time to do its job. Earlier hikes also haven’t fully filtered through the real economy.
Markets seem aligned with that message: Pricing shows almost no chance of a move at the December 9 meeting and 15 basis points of tightening priced through end-2026, compared with more than 90 basis points of expected easing by the Fed.
Bottom line from the November Minutes: A bit more patience now, but softer labour data or a clear drop in household spending would open the door to rate cuts later on.
Technical landscape
AUD/USD maintains its bullish move well in place for yet another day on Monday.
The continuation of the rally could initially see the November high at 0.6580 (November 13) revisited prior to the October top of 0.6629 (October 1), all preceding the 2025 ceiling of 0.6707 (September 17).
On the flip side, if sellers clear the key 200-day SMA at 0.6463, the pair risks a deeper drop to the November floor at 0.6421 (November 21), followed by the October valley at 0.6440 (October 14) and the August base at 0.6414 (August 21). Further south emerges the June low of 0.6372 (June 23).
Momentum indicators are tilted toward further upside in the short-term horizon: The Relative Strength Index (RSI) picks up pace and exceeds the 57 level, while the Average Directional Index (ADX) gathers some impulse and bounces past 14, suggesting a marginally strengthening trend.
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Outlook: Leaning higher… but carefully
AUD/USD still isn’t in a runaway rally: It remains sensitive to China headlines and shifts in risk sentiment. A clean break below 0.6400 would put a deeper correction squarely on the table.
But for now, a softer USD backdrop, signs of stability in Australia’s data, and modest support from China are keeping the upside bias alive. Gains from here are likely to be gradual and contested, but the Aussie continues to find reasons to climb.
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.
