Australian Dollar Price Forecast: The hunt for 0.7200

The Aussie Dollar's solid rebound since April seems to have strengthened in the last few days, giving bulls back control and paving the way for AUD/USD to perhaps challenge the yearly tops near 0.7200 the figure in the short-term horizon. For now, the pair’s positive outlook should remain in place amid elevated domestic inflation and the RBA’s cautious stance

The Australian Dollar (AUD) builds on the optimism seen at the beginning of the week, motivating AUD/USD to rapidly leave behind the 0.7100 barrier to hit new five-week peaks on turnaround Tuesday.

The continuation of the pair’s strong bounce comes on the back of the intense sell-off in the US Dollar (USD), sending the US Dollar Index (DXY) to levels last seen in early March around the 98.00 region. The Greenback’s bearish trend comes on the back of investors’ renewed hopes of a potentially more lasting US-Iran ceasefire along with dwindling geopolitical tensions.

Australia: still holding up, but losing a bit of momentum

Australia’s macro story still looks broadly solid, supported by resilient domestic dynamics, but there are growing signs that the cycle is starting to cool.

At a broad level, not much has changed. The economy continues to outperform many of its peers, inflation remains sticky across key components, and the Reserve Bank of Australia (RBA) is sticking to a cautious, data-dependent stance after its recent tightening moves.

The first cracks are beginning to appear, however: March Purchasing Managers’ Index (PMI) readings for both manufacturing and services slipped below the 50 mark, pointing to a gradual loss of momentum in domestic business activity.

There are still some brighter spots. February’s trade surplus widened to A$5.686 billion, the strongest since mid-2025, while growth remains firm, with Gross Domestic Product (GDP) expanding by 0.8% QoQ in Q4 2025 and 2.6% over the year. The labour market is holding up, but not quite as firmly as before, with the unemployment rate edging up to 4.3% in February even as employment rose by nearly 49K.

Inflation, however, remains the key issue. The latest Consumer Price Index (CPI) came in at 3.7% YoY, with the Trimmed Mean at 3.3% and the Weighted Median at 3.5%. Disinflation is happening, but at a slower pace than hoped.

All told, the RBA is not ready to declare victory just yet, and policymakers continue to signal that inflation may not return to target until around mid-2028.

China: steady, but no longer the driver

The Chinese economy continues to underpin its Australian peer, albeit its strength seems to have lost some impulse as of late.

Indeed, the latest data saw the economy expand by 4.5% YoY in the last quarter of 2025, while Retail Sales increased at an annualised 2.8% during the first two months of the current year. However, hints of a slowdown are appearing, especially within the trade sector after the surplus contracted significantly in March, falling to just over $51 billion, down from almost $91 billion in the previous month.

That mixed bag is also reflected in the activity indicators: the official figures from the National Bureau of Statistics (NBS) still suggest a shrinking economy, while private surveys, such as RatingDog, continue to indicate expansion, even if the rate of that growth has moderated.

Meanwhile, inflation adds to that middle-ground narrative after the CPI rose 1.2% YoY in February, while Producer Prices remained in deflation at -0.9% over the past year.

Put together, China looks more like a stabilising force than a true engine of growth. In that context, the People’s Bank of China (PBoC) is likely to remain on hold, with Loan Prime Rates (LPR) expected to stay unchanged at 3.00% and 3.50% at the next meeting.

RBA: still leaning hawkish, but timing is the question

The RBA delivered a very close call at its latest meeting, with a 5–4 split in favour of a 25 basis points hike, taking the Official Cash Rate (OCR) to 4.10%. That split alone highlights just how divided the board has become.

That said, the core message remains largely unchanged: capacity constraints are still in play, and higher crude oil prices are likely to keep near-term inflation pressures elevated. In her press conference, Governor Michele Bullock made it clear that demand is still running too hot for comfort.

Where the discussion is evolving, however, is around timing. That said, some policymakers favoured a pause to reassess the situation amid the uncertain global backdrop while evaluating at the same time the lagged impact of previous rate hikes.

Indeed, the latest Minutes reflected that cautious tone, suggesting that the outlook has become harder to read. In addition, global developments are also seen adding another layer of uncertainty to the bank’s policy path.

Market participants, in the meantime, keep advocating for further tightening, pencilling in just over 52 basis points of additional hikes by year-end.

AUD positioning: still long, but starting to unwind

The Aussie remains heavily skewed to the long side, although the latest speculative data for the week ending April 7 shows some early signs of trimming. That said, non-commercial net longs edged down to around 70K contracts, suggesting investors are beginning to scale back after the steady build-up seen in previous weeks.

Price action, however, is telling a different story after AUD/USD slid toward the 0.6970 zone during that time, deepening the recent divergence between market positioning and the actual price action. That said, price action failed to gather steam despite sentiment staying broadly constructive during the period.

Additionally, open interest has also lost momentum, suggesting that traders were closing out their positions rather than reversing them. To conclude, this looks more like a gradual reduction in exposure than an outright shift in direction.

That leaves AUD somewhat vulnerable: unless the larger economic picture brightens, the possibility of additional long liquidations should persist, especially if the Greenback remains on a positive footing.

AUD/USD outlook: the rally is there; conviction still isn’t

Base case, cautiously constructive:

The pair has recently broken above the 0.7100 barrier, although it keeps looking at the geopolitical backdrop. However, the upward movement could begin to stall in case the surpassing of 0.7100 fails to gather sustainable pace. The outlook depends on the US dollar staying weak and the overall risk environment not shifting dramatically.

Bull case, though not yet proven:

For this rally to persist, the market needs to show real strength. If risk appetite continues to improve, then spot could break above 0.7100 with some conviction, setting the next milestone at 0.7200 while reinforcing the constructive outlook at the same time.

Bear case: risks still there:

However, the potential for a reversal should not be ruled out in case the current sentiment sours, the Greenback picks up pace, or Chinese fundamentals deteriorate. A drop below the 0.7000 yardstick would probably trigger a deeper retracement, potentially targeting the 0.6900 region.

The rally is real, but it still feels fragile. Markets need stronger conviction to keep it going.

What matters for AUD/USD now

Near term: the US Dollar, general risk mood, and any new geopolitical news will still be the major drivers. Later this week, all the attention is expected to be on the publication of key Chinese data, including GDP figures, Balance of Trade, Retail Sales and Industrial Production.

Risks: a slowdown in the Chinese economy, a more aggressive Federal Reserve (Fed), or any change in the RBA's position may quickly make the Aussie unstable.

Technical corner

In the daily chart, AUD/USD trades at 0.7145, keeping a constructive bullish bias as spot holds well above the 55-, 100- and 200-day simple moving averages (SMAs), which cluster between roughly 0.67 and 0.70. Momentum supports the topside, with the Relative Strength Index (14) hovering in the low 60s, hinting at persistent buying pressure, while a subdued Average Directional Index (14) suggests the advance is steady but not yet in a strong trend phase.

On the topside, immediate resistance is located at 0.7188, where a Fibonacci projection converges with a prior horizontal cap, ahead of 0.7283 and then 0.7661. On the downside, initial support emerges at the 55-day SMA near 0.7031, reinforced by the 23.6% Fibonacci retracement at 0.7007, with deeper demand expected around the 0.6895–0.6874 band, where the 38.2% retracement aligns with the 100-day SMA, before the broader bullish floor formed by the 50% and 61.8% retracements and the 200-day SMA between roughly 0.68 and 0.67.

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

Bottom line: constructive, but not quite there yet

The overall picture for the Australian Dollar remains strong, and the RBA isn't likely to change its position in the near future, which should maintain a floor against occasional bouts of selling pressure.

Furthermore, the Australian currency thrives when investors are feeling confident, but when things get shaky, the Greenback is often the one regaining its footing. Consequently, despite a generally favourable long-term view, the immediate future is still somewhat unpredictable.