Australian Dollar Price Forecast: Technical bounce in place?

The Australian Dollar (AUD) has gathered extra pace in quite a positive start to the week, prompting AUD/USD to build on Friday’s decent advance and extend its bull run to the proximity of the critical 0.7000 barrier.

The pair’s continuation of the uptrend comes despite another firm performance of the US Dollar (USD), in a context dominated by a generalised risk-aversion mood and steady geopolitical tensions.

Following the September tops near 0.7250, the pair has surrendered more than 3 cents when it flirted with the 0.6900 contention zone last week, just to gather some traction soon afterwards.

All in all, the door remains open for extra losses as long as spot keeps trading below its 200-day SMA. However, the Reserve Bank of Australia’s (RBA) hawkish policy bias, combined with still elevated inflation in Australia, should cushion against any deep corrections for the time being.

Australia’s resilience meets signs of slowing momentum

Australia’s economy continues to compare favourably with many of its G10 peers, supported by domestic demand and positive economic growth. Persistent inflation also supports the RBA’s cautious, data-dependent policy stance.

However, business activity seems to have lost some momentum after final data showed the Purchasing Managers’ Index (PMI) for Manufacturing cooling to 49.6 in September and easing to 51.9 when it comes to Services, from 52.0 and 53.2, respectively.

Trade data provided another positive, albeit humble, signal after August’s trade surplus came in at just A$0.495 billion, adding to the A$1.351 billion surplus registered in the previous month (revised from A$1.923 billion).

Growth figures were less encouraging, however. Indeed, the Gross Domestic Product (GDP) expanded by 0.4% QoQ in the second quarter of 2026, up from 0.3%, while annual growth came in at 2.1%, down from the previous 2.5% yearly expansion.

The labour market also showed mixed signs in August, with the Unemployment Rate rising to 4.6% and Employment Change increasing by 39.5K, reversing July’s nearly 16K drop.

Inflation seems to have lost some impulse after the most-watched Trimmed Mean came in at 3.6% over the last twelve months, despite the headline CPI ticked higher to 4.0% from a year earlier.

The Melbourne Institute’s Consumer Inflation Expectations measure reinforced those figures after holding steady at 4.9% in September.

The figures leave the RBA’s inflation task incomplete. Policymakers expect inflation to return to target only in early 2028, keeping the emphasis on patience rather than an imminent policy pivot.

China offers stability, but little fuel for the Aussie

China is providing stability for the Australian economy, but not the growth impulse that has supported the Australian Dollar during previous expansions.

The Chinese economy grew by 4.3% YoY in the April-June period, while Industrial Production growth regained traction, expanding by 5.2% YTD, and the trade surplus widened to $119.1 billion in July, supported by decent increases in both imports and exports. However, on the downside, consumer spending remained sluggish after Retail Sales rose by only 0.4 % from a year earlier.

In addition, business surveys presented a promising picture: the National Bureau of Statistics reported that the Manufacturing PMI improved to 50.1 in September (from 49.8), while the Services PMI improved to 50.2 (from 49.0). In the same direction, private measures like RatingDog remained in expansionary territory, with Manufacturing at 52.1 (from 51.5) and Services at 51.6 (from 51.4).

Disinflationary pressures seem to have taken a breather in August, with the CPI gaining 0.8% YoY, up from 0.5%, while prices rose by 0.4% on a monthly basis. Producer Prices rose by 3.8% over the previous twelve months, down from the 3.5% increase recorded in the previous month.

The People’s Bank of China (PBoC) left its Loan Prime Rates unchanged early on Monday, maintaining the one-year rate at 3.00% and the five-year rate at 3.50%.

China is therefore neither providing a major boost nor creating a significant drag. Unless the data reveal a clearer acceleration or deterioration, its influence on AUD/USD is likely to remain limited.

The RBA hikes again as inflation refuses to cooperate

In a unanimous decision, the RBA hiked its OCR by 25 basis points to 4.60% at its meeting on Tuesday.

The statement said the Middle East conflict had pushed global energy prices well above the assumptions in its August forecasts, while inflation had proved stronger than expected, and short-term inflation expectations remained elevated. Although policy has been tightening since the start of the year had slowed the economy, the Board judged that further restraint was needed to return inflation to its target within a reasonable timeframe.

At her press conference, Governor Michele Bullock said domestic capacity pressures remained the main driver of inflation and warned that a prolonged Middle East conflict could lead businesses to pass higher costs on to consumers. While financial conditions were already restrictive, the Board concluded that another rate increase was warranted, stressing that policy would continue to tighten in a measured way.

Bullock added that policymakers would need to see quarterly core inflation slow to around 0.6% before they could gain greater confidence that inflation was moving back towards its goal.

Conclusion

The RBA delivered a hawkish hike, reflecting a deterioration in the inflation outlook driven by persistent domestic price pressures, elevated inflation expectations and higher energy costs. While further tightening remains possible, future decisions will continue to depend on incoming inflation data.

AUD/USD recovery runs into the 200-day SMA

Baseline outlook

The medium-term outlook has deteriorated in the last few weeks, as the pair remains unable to regain upside traction in a sustained manner. While below the 200-day SMA (0.7030), the pair should face an increasing chance of further losses. Against this backdrop, the continuation of the current sell-off could extend toward the June floor near 0.6860 (June 30).

Of note, the daily Relative Strength Index (RSI) has bounced off the oversold zone, although it remains close to it.

The resumption of the bullish bias will likely require a strong catalyst, namely a sustained improvement in risk appetite trends or renewed and persistent US Dollar weakness.

Upside scenario

A stronger risk-on environment should face the initial barrier at the 200-day SMA, prior to the weekly top at 0.7140 (September 21). North from here, a test of the 2026 high near 0.7280 should come into view.

Downside scenario

An additional deterioration in global risk sentiment, persistent strength in the Greenback, or renewed weakness in Chinese data could further fuel the ongoing selling mood.

Initial support is at the September floor of 0.6947 (September 30). A breach below the latter would increase the likelihood of a retest of the weekly low at 0.6922 (July 29) ahead of the June base.

Shorts pile back in as bearish momentum accelerates

Bearish positioning in the Australian Dollar deteriorated sharply in the week ending September 29, according to the Commodity Futures Trading Commission (CFTC). Indeed, net speculative positioning fell to just over 63.2K contracts, more than doubling the previous week’s decline. The 4-week change also worsened significantly to -23,833 from -2,359, confirming that bearish momentum has accelerated.

Furthermore, open interest increased only marginally, rising to nearly 310K contracts. With net shorts deepening while overall participation remained broadly stable, the move points to a loss of optimism and some fresh short-building, rather than a major expansion of bearish exposure across the market.

Speculative exposure declined to -20.4%, while its percentile remained elevated at 72.4. The Net Position Percentile fell to 33.7, indicating that net positioning is bearish but not yet at a historical extreme. Bearish exposure is therefore material, although it has not reached levels normally associated with a fully crowded AUD short.

Overall, the AUD positioning backdrop has turned decisively more negative. The sharp weekly deterioration and the collapse in 4-week momentum point to renewed pressure on the currency, while the stable open interest suggests that bearish sentiment is deepening rather than accelerating through a broad wave of new participation. Further losses could nevertheless increase the risk of a more crowded short position if the trend persists.

What’s next for AUD/USD?

US Dollar dynamics, global risk sentiment, and geopolitical developments remain the main near-term drivers of AUD/USD.

In the meantime, the next data release note on the domestic calendar will be the publication of the Consumer Confidence gauge by Westpac.

Beyond the immediate releases, the main risks include a sharper slowdown in China, a persistently cautious Fed, a deterioration in investor risk appetite or a change in the RBA’s current policy stance. Any of these developments could quickly alter the outlook for the Australian Dollar.

Technical landscape

In the daily chart, AUD/USD trades at 0.6968, maintaining a bearish near-term bias as spot holds beneath the 200-day simple moving average (SMA) at 0.7032, the 100-day SMA at 0.7056 and the 55-day SMA at 0.7081. The cluster of overhead averages, together with horizontal resistance at 0.7079, suggests rallies remain capped for now, while the Relative Strength Index (14) hovering near 34 keeps downside momentum in focus as the Average Directional Index at 39 hints at a strengthening trend phase.

On the downside, initial support is seen at the horizontal level near 0.6833, ahead of a deeper floor at 0.6660, with additional cushions at 0.6593 and 0.6414 before the structural base at 0.6373. On the topside, immediate resistance is defined by the 200-day SMA at 0.7032, followed by the 100-day SMA at 0.7056 and the 0.7079 barrier, while higher up, the 0.7278/0.7283 band and 0.7661 mark subsequent hurdles that would need to be reclaimed to neutralize the broader bearish tone.

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

Domestic support, external pressure: AUD caught in the middle 

Some dark clouds continue to hover around the AUD’s near-term outlook.

Australia’s domestic backdrop compares favourably with that of many advanced economies, and the RBA is in no hurry to abandon its hawkish stance. These factors should somewhat contain the bearish impulse.

The recovery nevertheless remains vulnerable to renewed strength in the Greenback, persistent geopolitical uncertainty and a Chinese economy that is stabilising rather than accelerating.

The 200-day SMA remains the key level for the medium-term outlook. Holding above it preserves the constructive structure, but a convincing break above 0.7200 is necessary to further extend the bull run.

However, such a move would require the resumption of the downward trend in the Greenback, stronger demand for risk-sensitive assets, additional cooling in US inflation, or a (less likely) dovish shift from the Fed.

Until then, external forces are likely to exert more influence over the Australian Dollar than domestic fundamentals.