Australian Dollar Price Forecast: The 0.7300 hurdle comes next

The Aussie Dollar is attempting to break above the ongoing multi-day consolidative phase, with AUD/USD reaching fresh yearly peaks near the 0.7300 barrier. For now, the pair’s positive outlook remains unchanged, propped up by elevated inflation in Oz and the RBA’s cautious stance.

The Australian Dollar (AUD) extends Monday’s optimism, lifting AUD/USD to new YTD peaks in the upper 0.7200s, always bolstered by the sharp improvement in the sentiment surrounding the risk complex.

On the latter, hopes of a US-Iran peace deal have been reignited overnight, lifting spirits among market participants and bringing in much-needed oxygen to the risk-associated universe.

The pair’s extra uptick also follows a marked retracement in the US Dollar (USD), which in turn prompts the US Dollar Index (DXY) to flirt with the area of four-week lows near 97.50 amid the continuation of the corrective move in US Treasury yields across multiple time frames.

Australia is holding firm, but the outlook is getting softer

The Australian economy does look healthy and stable altogether and, honestly, is in much better shape than many of its G10 peers.

This performance appears underpinned by a solid domestic demand and pretty decent figures when it comes to economic growth. The spectre of sticky inflation seems to justify the cautious and data-dependent stance from the Reserve Bank of Australia, particularly following the latest meeting, where it raised rates to 4.35%.

Supporting the above, the preliminary data from the Purchasing Managers’ Index (PMI) showed Manufacturing at 51.0 and Services at 50.3, both recovering and back to expansion territory in April. However, this bounce feels more like a slow grind higher than a meaningful pickup in activity… for now.

In the same direction, the trade surplus widened to A$5.686 billion in February, the strongest reading since mid-2025, while the Gross Domestic Product (GDP) expanded by 0.8% QoQ and 2.6% YoY in the last quarter of 2025.

On the not-so-bright side, the labour market seems to be somewhat cooling: the Unemployment Rate remained at 4.3% in March, and the Employment Change slowed sharply to 17.9K from close to 50K recorded in the previous month.

Back to the thorny inflation issue: the latest Consumer Price Index (CPI) came in at 4.1% YoY, with both the Trimmed Mean and Weighted Median running at 3.5% YoY. Following these prints, any real sense of disinflation now seems to be fading away.

For the RBA, that means the job is far from done, as policymakers continue to signal that inflation may only return to target around mid-2028, keeping the focus firmly on patience rather than any imminent pivot.

China looks steadier, but momentum is still missing

China now looks more like a stabilising force than the tailwind it usually was for the Australian economy.

Let’s see some numbers: the economy expanded by 5.0% YoY in Q1, Retail Sales gained 2.43% since the beginning of the year and 1.7% over the last twelve months.

Of note is the sharp reduction of the trade surplus, which narrowed to just over $51 billion in March from nearly $214 billion previously, all in response to weaker demand dynamics.

However, business activity seems to be regaining traction after the National Bureau of Statistics (NBS) reported Manufacturing PMI at 50.3 in April, while Services slipped into contraction territory at 49.4. At the same time, private gauges such as RatingDog still point to expansion, with Manufacturing climbing to 52.2 and Services up to 52.6.

The disinflationary pressure in China has been losing steam, as the CPI rose 1.0% YoY in March, while Producer Prices went up by 0.5% YoY, moving out of deflation.

And what about the People’s Bank of China (PBoC)?. As expected, it kept the Loan Prime Rates (LPR) unchanged at 3.00% for the one-year tenor and 3.50% for the five-year tenor in April.

To sum up, China is no longer pushing growth higher, but it is not dragging it down aggressively either. It is simply keeping things steady.

Inflation first: the RBA is not ready to blink

The RBA matched consensus yesterday, lifting the OCR by 25 basis points to 4.35%. The statement read like a central bank dealing with a more complicated world: the outlook has clearly worsened, with growth marked down and inflation pushed higher, leaving policymakers facing a more uncomfortable trade-off.

Inflation is now expected to stay higher for longer, with the CPI only returning to target around 2027–2028. At the same time, the GDP is set to run below trend, and the jobless rate is seen gradually drifting higher.

A big part of that shift comes from the oil shock linked to the Middle East conflict. The bank sees it as a hit to growth, but also a fresh source of inflation pressure, exactly the kind of mix central banks dislike. There are even references to possible energy shortages if the situation drags on.

For now, though, there is little sign that demand has rolled over in a meaningful way, and underlying inflation pressures remain firm, with businesses increasingly expected to pass on higher costs.

In her press conference, Governor Michele Bullock sounded a bit more measured. The key message is that rates are now in restrictive territory, which gives the RBA some breathing space.

In her words, the bank can now afford to “sit and see”, taking time to assess how the shock plays out rather than rushing into further moves. That in itself feels like a shift in tone.

Still, the door to more tightening is not closed. Bullock made it clear that if higher costs start feeding into inflation expectations, the RBA would have to respond, potentially with higher rates.

Bullock also framed the situation quite bluntly, describing the oil shock as something that reduces real incomes and “makes us poorer”, while warning that even a quick resolution would not prevent higher costs from lingering.

All in all

The central bank is still focused on inflation, but it sounds less eager to keep tightening aggressively. Rates are now seen as restrictive enough to pause if needed, although risks around energy and inflation expectations mean the job is not fully done yet.

AUD/USD: The move is there, but conviction still lacking

Base case

The pair has managed to break above the key 0.7200 level, but it still feels heavily dependent on the broader backdrop. Without a sustained improvement in risk sentiment or continued US Dollar weakness, the move could start to lose traction.

Bull case

Further conviction is needed. If risk appetite picks up serious pace, spot could extend the uptrend and thus retarget the minor 0.7300 barrier, all prior to the 2022 ceiling at 0.7593. Speculative positioning is expected to have its say in this scenario.

Bear case

Some loss of momentum should not be ruled out in the current volatile context. If sentiment deteriorates, the US Dollar strengthens, or Chinese data disappoints, the pair could slip back below the initial contention zone at 0.7100, opening the door to a deeper move at the same time.

The rally is there, although markets are still not fully convinced.

What actually matters for the Aussie right now

In the near term, it is still all about the US Dollar, global risk sentiment, and geopolitics. Those remain the key drivers of price action. On Thursday, trade balance results from Australia and China will be the salient events on the docket.

Key risks include a sharper slowdown in China, a more aggressive Federal Reserve (Fed), or any shift in the RBA’s stance. Any of these could quickly destabilise the Australian currency.

Technical Analysis

In the daily chart, AUD/USD trades at 0.7232, holding a constructive bullish bias as it remains above the 55-day, 100-day and 200-day simple moving averages, which cluster between roughly 0.71 and 0.68 and now underpin the advance. The Relative Strength Index near 63 points to firm but not yet overbought upside momentum, while a low Average Directional Index around 14 suggests the uptrend lacks strong directional conviction and could be prone to consolidation phases.

On the topside, initial resistance is located at the recent horizontal cap near 0.7283, with a break there exposing the next barrier at 0.7661. On the downside, immediate support is seen at 0.7188, ahead of the 55-day SMA around 0.7069 and the 100-day SMA near 0.6964; a deeper pullback would bring into view the 0.6833 level and the 200-day SMA at 0.6755, where buyers would be expected to defend the broader bullish structure.

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

Bottom line: constructive, but not fully convincing

The broader backdrop for the Australian Dollar remains supportive, and the RBA’s stance should continue to provide a degree of support on dips.

But this is still a currency that trades heavily on sentiment. When confidence is strong, the Aussie performs well. When uncertainty creeps in, the US Dollar tends to take over.

So while the medium-term story still leans constructive, the near-term outlook feels less certain. The move higher is there, but conviction is not quite there yet.