Australian Dollar Price Forecast: Next on the upside comes 0.7100
- AUD/USD reverses the previous pullback and regains 0.7000 and beyond.
- The US Dollar faces some renewed downside pressure despite US-Iran jitters.
- The Australian GDP figures showed the economy expanded above estimates in Q4.
Sticky domestic inflation and a Reserve Bank of Australia (RBA) that is in no rush to soften its hawkish stance continue to provide an underlying cushion for the Australian Dollar (AUD) for now, keeping the door open to further gains and limiting the downside. However, ongoing geopolitical tensions are likely to keep rallies measured for now.
Following a steep retracement to the 0.6950 region on the previous day, AUD/USD has rapidly embarked on a modest rebound on Wednesday, managing to break above the key 0.7000 mark, leaving behind two daily declines in a row as well.
The daily recovery in spot kicks in amid renewed selling pressure on the US Dollar (USD) despite the unabated flight-to-safety environment linked to the US–Israel–Iran tensions and the implications for global energy markets.
In an uneasy geopolitical backdrop, high-beta currencies such as the Aussie tend to step back. For now, though, the move still looks more like a sentiment-driven pause rather than a structural shift in the medium-term narrative.
Australia: resilience is the name of the game
The domestic picture remains healthy. February’s final Purchasing Managers' Index (PMI) readings showed Manufacturing at 51.0 and Services at 52.2, both comfortably in expansion territory.
Retail spending remains resilient, while the trade surplus widened to A$3.373 billion at the end of 2025. Gross Domestic Product (GDP) expanded 0.8% QoQ in Q4, lifting annual growth to 2.6%, exceeding the RBA projections.
The labour market is softening at the margin, not cracking. Employment Change rose by 17.8K in January and the Unemployment Rate held steady at 4.1%. It seems that momentum is gradually easing, but there are still no meaningful cracks to notice.
Inflation: unfinished business
Inflation remains the “hot potato” in Oz after the headline Consumer Price Index (CPI) held at 3.8% YoY in January, slightly above expectations, while the Trimmed Mean CPI edged higher to 3.4% YoY.
It appears that disinflation is progressing, but the pace remains slower that the bank would prefer. The RBA still expects inflation to peak around Q2 2026 before gradually returning to the midpoint of the 2–3% target band by mid-2028.
Credit data reinforce that narrative. Home Loans increased 10.6% QoQ in Q4 and Investment Lending rose 7.9%. Policy remains restrictive, but demand has not rolled over.
China: economic limbo?
China currently acts more as a stabilising force than a major growth engine for the Australian outlook.
The economy expanded 4.5% YoY in Q4 according to the latest GDP figures, while Retail Sales increased 0.9% YoY in the last month of 2025.
Of note, official PMIs from the National Bureau of Statistics (NBS) came in mixed in February, but remained in contraction territory. That said, the Manufacturing gauge eased to 49.0 (from 49.3) and the Services print edged marginally higher to 49.5 (from 49.5). In contrast, the RatingDog surveys remained in expansion, with Manufacturing and Services printing at 52.1 and 56.7, both up from 50.3 and 52.3, respectively.
Inflation remains subdued, with CPI at 0.2% YoY and the Producer Price Index (PPI) down 1.4% YoY. 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%.
For the AUD, that means China is no longer a drag, but it is not yet a powerful tailwind either.
RBA: patient with a hawkish tilt
The RBA recently lifted the Official Cash Rate (OCR) to 3.85%, reinforcing that inflation remains the central concern.
Governor Michelle Bullock said on Tuesday that financial markets have remained orderly despite the Middle East tensions. For Australia, the impact is mixed. As a net energy exporter, higher prices can support national income, but a prolonged conflict could still weigh on household consumption.
Bullock reiterated that inflation remains elevated and that the Board remains focused on keeping inflation expectations anchored. Policymakers will continue to assess incoming data carefully, with every meeting remaining live.
She also noted that if labour market tightness persists, the unemployment rate may need to rise somewhat to help contain inflation.
Markets currently price just over 50 basis points of additional tightening this year. Not aggressive, but enough to maintain a meaningful yield floor under the Aussie.
Positioning: conviction gathers steam
Commodity Futures Trading Commission (CFTC) data show non-commercial net longs around 52.6K contracts, a fresh multi-year high and a clear signal of growing conviction in the Australian recovery story.
However, open interest slipped to roughly 248.7K contracts, suggesting part of the move reflects position adjustments rather than broad new inflows.
Indeed, that positioning is expected to provide some contention on dips, although elevated longs carry the potential of sharper pullbacks in case the sentiment shifts.
What drives AUD/USD from here
Near term: the US Dollar and geopolitics remain the dominant drivers. Indeed, strong US data, tariff developments, or further escalation in the Middle East could quickly reshape the pair’s direction. The Fed–RBA policy differential still offers relative support as well as healthy fundamentals and the hawkish RBA narrative.
Risks: the AUD is a high beta currency. If global risk appetite deteriorates, if China stumbles, or if the Greenback stages a sustained rebound, the unwind could be sharp.
Technical corner
In the daily chart, AUD/USD trades at 0.7063. The near-term bias stays mildly bullish as price holds well above the rising 55-, 100- and 200-day Simple Moving Averages (SMAs), which cluster between 0.6630 and 0.6880 and frame a well-established uptrend. The pair is consolidating below the 23.6% Fibonacci retracement at 0.6976, measured from the 0.6421 low to the 0.7147 high, with the Relative Strength Index (RSI) easing to 56, indicating moderating but still positive momentum after overbought readings. The Average Directional Index (ADX) retreating from above 50 toward the mid-30s signals a weakening trend phase, suggesting AUD/USD is in a pause rather than a reversal while it digests recent gains.
Immediate support emerges at 0.6944, with stronger chart support at the 0.6897 horizontal line, followed by the 38.2% retracement at 0.6870, where the rising short-term SMAs reinforce a demand zone. A break below 0.6870 would expose deeper supports at 0.6660 and then 0.6593, where the 200-day SMA aligns with prior swing lows. On the upside, initial resistance sits at the recent high near the 0.7147 Fibonacci level, ahead of the 0.7158 horizontal barrier, while a daily close above that cluster would reopen the way toward 0.7283 and, if extended, the more distant 0.7661 level.
(The technical analysis of this story was written with the help of an AI tool.)
Bottom line: constructive, but conditional
Australia’s macro backdrop remains relatively resilient, and the RBA is still firmly focused on inflation. That keeps the broader bias for the AUD constructive.
However, confidence remains conditional. The AUD looks good when global risk appetite is on the positive foot, although if the Greenback regains sustained momentum or geopolitical tensions sour, then volatility could quickly come back.
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.
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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.
