Australian Dollar Price Forecast: The 0.7150 zone caps the upside

It looks like AUD/USD has finally shaken off that messy, directionless trading and is now pushing back towards its year-to-date highs, reclaiming territory north of 0.7100. The move does not feel random, as sticky domestic inflation is keeping pressure on the upside, and the Reserve Bank of Australia (RBA) is still leaning hawkish. As long as price pressures refuse to cool convincingly, the policy backdrop continues to offer the Aussie a supportive tailwind.

The Australian Dollar (AUD) could not sustain an earlier move to multi-day highs vs. the US Dollar (USD) on Thursday, motivating AUD/USD to fade that move and revisit the sub-0.7100 region.

The pair’s daily correction follows a decent advance in the Greenback, which appears propped up by persistent geopolitical effervescence in the Middle East as well as unabated uncertainty surrounding the US trade front.

Australia: cooling, but not cracking

Australia’s economy is clearly coming off the boil, but this still feels like a controlled slowdown rather than the start of something uglier. Growth is easing, yes, but the engine is still running.

The February preliminary Purchasing Managers' Index (PMI) surveys confirm that: Manufacturing printed 52.0 and Services 52.2, both comfortably in expansion territory. Not booming, but certainly not contracting.

Retail spending remains resilient; the trade surplus widened to A$3.373 billion at the end of 2025, and Gross Domestic Product (GDP) expanded 0.4% QoQ in Q3, lifting annual growth to 2.1%. That is broadly in line with what the RBA had anticipated.

The labour market tells a similar story after the Employment Change rose by 17.8K in January, slightly below expectations, while the Unemployment Rate held steady at 4.1%. This is gradual cooling, not stress.

Inflation: the pressure point

If there is a fault line, it is inflation.

January data once again reminded markets that price pressures are not fading quickly. That said, the headline Consumer Price Index (CPI) held at 3.8% YoY for a second consecutive month, above the 3.7% consensus. More importantly, the Trimmed Mean CPI, the RBA’s preferred core gauge, edged up to 3.4% YoY from 3.3%.

Indeed, disinflation is intact. But it is not accelerating.

Looking ahead, the RBA still sees inflation peaking in Q2 2026, with the Trimmed Mean projected near 3.7% and headline CPI around 4.2%, before gradually easing back towards the midpoint of the 2 to 3% target range by mid 2028.

Policy is restrictive for a reason: the inflation fight is not finished.

Credit data in February reinforce that message, as Home Loans rose 10.6% QoQ in Q4, while Investment Lending increased 7.9%, suggesting that financial conditions are tight enough to cool demand but not tight enough to choke it off.

China: steady support, not a catalyst

China continues to act as a stabiliser for the Australian Dollar, but it is not providing strong momentum.

The economy expanded 4.5% YoY in Q4 and 1.2% QoQ, as per the latest GDP readings. Additionally, Retail Sales increased 0.9% YoY in December. Respectable, but hardly transformative.

Curiously, the January PMI split is telling: the official Manufacturing and Non-Manufacturing PMIs slipped into contraction at 49.3 and 49.4, respectively. Meanwhile, the Caixin Manufacturing PMI and Caixin Services PMI remained in expansion at 50.3 and 52.3, respectively, all indicating that larger state-linked sectors appear softer, while smaller private firms are proving more resilient.

The trade surplus widened to $114.1 billion in December, yet inflation remains subdued. That said, the CPI rose just 0.2% YoY, and the Producer Price Index (PPI) fell 1.4% YoY, showing that disinflation, and not reflation, lingers.

On the policy front, 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%. The tone remains measured and supportive rather than aggressive. Stability over stimulus.

For the Aussie, that means China is no longer a drag. But nor is it a powerful tailwind.

RBA: restrictive, but not reckless

Earlier this month, the RBA lifted the Official Cash Rate (OCR) to 3.85%, reinforcing that inflation remains the central priority.

Updated projections suggest price pressures will stay above target for much of the forecast horizon. On this, the Minutes were clear: without the latest hike, inflation would likely have remained above target for too long. Policymakers judged that risks had shifted sufficiently to warrant further tightening.

But there is no autopilot. No pre-commitment. The path remains data dependent.

Markets are currently pricing just over 41 basis points of additional tightening by year-end. Not aggressive, but enough to maintain a meaningful yield floor under the AUD.

Positioning: exposure rebuilding

Commodity Futures Trading Commission (CFTC) data show non-commercial traders increased net long positions to nearly 46K contracts in the week to February 17, the strongest level since late 2017.

This does not look like froth. It looks like exposure is being rebuilt.

Further data saw open interest climb to around 256.2K contracts, indicative of improving conviction without obvious crowding. There remains room for extension if sentiment continues to firm. The view is that investors seem to be stepping back into the AUD, cautiously but deliberately.

What matters now

Near term: the US Dollar should continue to dictate the mood, as strong US data, renewed tariff rhetoric, or geopolitical flare ups can quickly reshape AUD/USD dynamics. The Fed–RBA yield spread remains broadly supportive of the Aussie given the RBA’s firm stance.

Risks: the AUD is a high beta currency. If global risk appetite deteriorates, if China falters, or if the Greenback stages a sustained rebound, the unwind could be swift.

Technical levels

In the daily chart, AUD/USD trades at 0.7094. The near-term bias is mildly bullish as spot holds well above the rising 55-day and 100-day Simple Moving Averages (SMAs) clustered around 0.6800, while the 200-day SMA near 0.6600 underpins a broader upward structure. Price trades above the 61.8% Fibonacci retracement at 0.6699 and the 50.0% level at 0.6784, measured from the 0.6421 low to the 0.7147 high, showing buyers have defended the mid-range of the prior rally. The Relative Strength Index (RSI) at 61 stays above the 50 midline, reinforcing positive momentum, though losing the extreme overbought readings seen earlier. The Average Directional Index (ADX) around 41 signals a still-strong but stabilised trend backdrop.

Immediate resistance is seen at the 23.6% Fibonacci retracement at 0.6976, with a sustained break keeping the focus on the recent high zone around the horizontal barrier at 0.7158, followed by 0.7283. On the downside, initial support aligns at the horizontal level at 0.6897, ahead of the 38.2% retracement at 0.6870 that guards the short-term uptrend. A deeper pullback would expose the support band at 0.6660 and 0.6593, where the longer-dated SMAs also converge, while a failure there would open the broader base supports at 0.6414 and 0.6373.

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

Bottom line: constructive, not complacent

Australia’s macro backdrop remains resilient, propped up by a restrictive RBA, improving positioning and some stability in China.

That keeps the broader bias tilted to the upside.

But this is not a defensive currency. The Aussie thrives when global sentiment is constructive and struggles when risk sours. For now, dips are likely to attract buyers as long as the US Dollar remains contained.

If that changes, so does the narrative.