Australian Dollar Price Forecast: Next on the upside sits 0.6700
- AUD/USD extends its upside impulse north of the 0.6600 barrier on Thursday.
- The US Dollar’s lack of direction continues to prop up the move higher in spot.
- The RBA is widely anticipated to keep its OCR unchanged next week.
The Australian Dollar (AUD) extends its needle-like ascent on Thursday, prompting AUD/USD to finally surpass the 0.6600 hurdle for the first time since early October.
The pair thus remains well en route to closing its second consecutive week of gains, always underpinned by the intense move southwards in the Greenback and the continuation of the cautious stance from the Reserve Bank of Australia (RBA).
Slow and steady, and that’s okay
Australia’s economic story isn’t flashy right now, and honestly, that’s sort of the goal. Things are moving forward at a comfortable pace. November PMIs helped calm a few nerves: Manufacturing is back in expansion at 51.6 and Services pushed higher to 52.7.
Households are still spending, with Retail Sales up 4.3% YoY in September, and the trade surplus inching up to A$3.938 billion. Yes, business investment slipped in Q3 (-0.9% QoQ), but it feels more like a wobble than a warning sign.
Growth did disappoint a little: Real GDP rose 0.4% QoQ in Q3, softer than both Q2’s 0.7% and what markets (and the RBA) expected. But the annual rate is holding at 2.1%, almost exactly where the RBA thought it would be by year-end. Translation: the economy still has some stretch in it.
The labour market continues to pull its weight: The Unemployment Rate dipped to 4.3% in October with a solid 42.2K jobs added.
Where things get tricky is inflation. October CPI picked up to 3.8% YoY, the fastest in about 17 months, with housing, food and recreation keeping prices sticky. Trimmed mean CPI (the RBA’s favourite measure) also surprised higher at 3.3% YoY. That one got extra attention because it was the first full monthly CPI since the Australian Bureau of Statistics (ABS) shifted away from quarterly updates.
China’s helping hand, just not a turbo boost
China is still providing a floor for Australia’s outlook, just not the kind of rocket-fuel support we were used to. Q3 GDP grew 4.0% YoY and October Retail Sales were up 2.9% YoY. Solid enough.
But momentum is slipping elsewhere. November PMIs underline that cooling trend: The official NBS Manufacturing PMI nudged up to 49.2 but stayed below 50 for an eighth straight month. RatingDog’s more private-sector-focused survey actually dipped back into contraction at 49.9, its first in four months.
Why does that matter? NBS captures the big state-owned firms; RatingDog reflects the more entrepreneurial, export-driven side. Lately, that side looks tired.
Services aren’t exactly powering ahead either. The official non-manufacturing PMI slipped below 50 (49.5), the first time since the messy Zero-Covid exit in late 2022, while RatingDog’s Services PMI eased to a five-month low at 52.1.
Trade has also softened a touch, with the surplus narrowing slightly in September to $90.07 billion from $90.53 billion.
There are a couple of bright spots: Headline CPI is finally back in positive territory at 0.2% YoY and Core CPI edged up to 1.2% YoY, partly thanks to Golden Week travel spending.
Still, the People’s Bank of China (PBoC) isn’t stepping on the gas. Loan Prime Rates (LPR) remain unchanged at 3.00% (one-year) and 3.50% (five-year). So while China is still a friend to the Australian Dollar (AUD), it’s more of a gentle nudge than a big push.
The RBA isn’t blinking
The RBA left the Official Cash Rate (OCR) at 3.60% in early November, right in line with expectations. Governor Michele Bullock has been consistent: inflation is taking its time to fall, the labour market is firm, and policy is “close to neutral.” They want to let previous tightening keep working through the system.
Markets are on board too. There’s basically no expectation of a change at the December 9 meeting, and only around 32 basis points of further tightening are priced through the end of 2026 (up from 20 last week). Compare that with roughly 85 basis points of expected easing from the Fed, and you see why AUD/USD has a better tailwind these days.
The November Minutes reinforced it: patience now, and if the economy later shows cracks, the next move would be downward, not up.
Technical landscape
AUD/USD’s march north remains unabated for now, supported by solid techs, the weaker US Dollar and the prudent (hawkish?) stance from the RBA.
A sustainable break above the 0.6600 hurdle should put a test of the October peak of 0.6629 (October 1) back on the radar, prior to the 2025 ceiling of 0.6707 (September 17) and the 2024 high at 0.6942 (September 30).
On the flip side, temporary support emerges around 0.6530, where both the 55-day and 100-day SMAs coincide. Down from here lines up the key 200-day SMA at 0.6468 ahead of the November base at 0.6421 (November 21). The loss of the latter exposes a potential visit to the October floor at 0.6440 (October 14) followed by the August valley at 0.6414 (August 21) and the June trough of 0.6372 (June 23).
Looking at the macro environment, further gains should remain well on the cards while above the critical 200-day SMA.
Additionally, momentum indicators still favour the continuation of the upward bias. Indeed, the Relative Strength Index (RSI) challenges the 65 level, while the Average Directional Index (ADX) climbing past the 17 mark indicates that the current trend continues to strengthen, albeit at a gradual pace.
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So what’s the takeaway for AUD/USD?
The Aussie isn’t gearing up for a moonshot rally, at least not yet. It’s still hypersensitive to shifts in global risk sentiment and the latest mood music out of China. A drop back below 0.6400 would turn things more bearish in a hurry.
But for now? A weaker US Dollar, steady domestic data, a prudent RBA and a little help from China are enough to keep the trend pointing gradually higher. Progress from here might be slow and occasionally frustrating, but the bias still leans to the upside.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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.
