Australian Dollar Price Forecast: Near-term momentum remains bullish
- AUD/USD resumes its uptrend, reaching new three-week tops around 0.6570.
- The US Dollar wakes up and advances modestly amid mixed US Treasury yields.
- The Australian Current Account deficit widened a tad to $A16.6 billion in Q3.
The Australian Dollar (AUD) resumes its uptrend on Tuesday, with AUD/USD rapidly leaving behind Monday’s slight losses and moving north to hit new three-week tops around 0.6570. From here, traders are eyeing a potential run toward the November highs a tad higher at 0.6580.
The Aussie’s solid form comes despite an acceptable rebound in the US Dollar (USD), which manages to set aside part of its recent deep correction despite the idea that the Federal Reserve (Fed) could trim its interest rates as soon as next week.
Australia: Progress, but no victory laps just yet
Australia’s economy isn’t delivering big surprises, and that’s actually the point. It’s a story of slow, steady progress. Indeed, November PMI figures helped settle nerves, with Manufacturing back in expansion at 51.6 and Services nudging up to 52.7.
Consumers are still holding up: Retail Sales rose 4.3% YoY in September, and the trade surplus widened to A$3.938 billion. Business investment did slip in Q3 (-0.9% QoQ), but it feels more like a wobble than the start of a downturn.
Growth may not be glamorous, but it’s positive. GDP expanded 0.6% QoQ and 1.1% YoY in Q2, not headline-grabbing numbers, yet enough to reassure the Reserve Bank of Australia (RBA) that momentum hasn’t vanished. All eyes now turn to Q3 GDP on Thursday.
The labour market is still pulling its weight too: the Unemployment Rate dipped to 4.3% in October and the Employment Change jumped by 42.2K.
Inflation is the real trouble spot: October CPI came in hot at 3.8% YoY, the strongest in about 17 months, driven by stickier prices in housing, food, and recreation. The trimmed mean CPI, the RBA’s preferred measure, also printed above expectations at 3.3% YoY. That release carried extra significance: It was the first full monthly CPI since the Australian Bureau of Statistics (ABS) shifted away from the old quarterly format.
China: A supportive neighbour, not a saviour
China remains an important tailwind for Australia, but it isn’t exactly flying. Q3 GDP managed 4.0% YoY and Retail Sales grew 2.9% YoY in October. But momentum elsewhere has softened: Manufacturing PMI eased to 50.6, Services to 52.6, and Industrial Production undershot at 4.9% YoY. The trade surplus also narrowed notably in September, another sign that demand is still uneven.
There was at least some good news on prices: Headline CPI finally climbed back into positive territory at 0.2% YoY, boosted by Golden Week travel and tourism. In addition, the Core CPI ticked higher as well, up to 1.2%.
Still, the People’s Bank of China (PBoC) is staying cautious, keeping Loan Prime Rates (LPR) unchanged at 3.00% (one-year) and 3.50% (five-year). Supportive? Yes. A major stimulus push? Not yet.
So China is helping the Australian Dollar (AUD), just not enough to drive a surge on its own.
RBA: Calm hands at the wheel
The RBA left the Official Cash Rate (OCR) unchanged at 3.60% in early November, right in line with expectations. Policymakers aren’t dismissing the idea of further tightening, but they’re also not entertaining rate-cut talk anytime soon.
Inflation’s still sticky, jobs remain tight, and Governor Michele Bullock keeps stressing that policy is “close to neutral”, meaning they just need time for earlier hikes to fully bite.
Markets are largely on board with that thinking: Pricing shows almost zero chance of a move at the December 9 meeting and around 20 basis points of tightening priced through the end of 2026, a stark contrast to expectations for around 85 basis points of easing by the Federal Reserve (Fed).
From the RBA’s November Minutes, the message is clear: Patience now, and if labour or household spending cracks later, cuts are the next step.
Technical landscape
AUD/USD rapidly left behind Monday’s reversal, refocusing on the upside and in the area beyond the 0.6500 hurdle.
If bulls push harder, spot should challenge the December peak at 0.6566 (December 1), closely followed by the November top at 0.6580 (November 13). Up from here lies the October high of 0.6629 (October 1), while clearing the latter should put the 2025 ceiling of 0.6707 (September 17) back on the radar.
In contrast, the resurgence of the downside pressure is expected to meet initial contention at the always relevant key 200-day SMA at 0.6464. If the pair breaks below it, then it could set sail to the November base at 0.6421 (November 21), prior to the October floor at 0.6440 (October 14) and the August valley at 0.6414 (August 21), all ahead of the June bottom of 0.6372 (June 23).
Finally, momentum indicators keep signalling further gains in the near term: The Relative Strength Index (RSI) climbs above the 57 level, while the Average Directional Index (ADX) approaches the 15 mark, hinting at some mild strengthening of the current trend.
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Where does that leave AUD/USD?
The Aussie isn’t set for a breakout, not yet. It’s still sensitive to swings in risk appetite and whatever comes out of China. A clear drop under 0.6400 would raise downside alarm bells.
For the moment though, a softer US Dollar, steady (if unspectacular) domestic data, and a bit of help from China are enough to keep upward momentum alive. Gains from here are more likely to be gradual and hard-won, but the bias remains upward.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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.
