Australian Dollar Price Forecast: The RBA grabs all the attention

The Aussie Dollar is still looking for a fresh catalyst to resume its upward trend, which began in late March and appears to have lost momentum ahead of the 0.7300 hurdle in early May. Meanwhile, dynamics around the US Dollar and geopolitics seem to have been too much for the Aussie, prompting a correction in AUD/USD to the area below the key 0.7000 contention zone. However, the AUD’s positive outlook remains unchanged, bolstered by still elevated inflation at home and the RBA’s hawkish approach.

The Australian Dollar (AUD) picks up fresh upside traction in quite a promising start to the new trading week for risk-linked assets, motivating AUD/USD to trade close to the key barrier at 0.7100 the figure and putting extra ground from last week’s troughs in the sub-0.7000 region, or two-month lows.

Indeed, the sentiment around the Aussie revives as investors keep assessing the improved tone from the geopolitical landscape, where the US and Iran signed an MOU which should end hostilities from all parties and allow the vital Strait of Hormuz to reopen once again.

Domestic resilience meets external uncertainty

The Australian economy does look healthy and stable altogether and, honestly, 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 (RBA), particularly following the latest meeting, where it raised rates to 4.35%, broadly in line with market expectations.

Supporting the above, the final data from the May Purchasing Managers’ Index (PMI) showed Manufacturing at 50.7 (from 51.3) and Services at 48.7 (from 50.7).

Adding some colour to the domestic fundamentals, the latest trade balance figures showed a A$1.791 billion surplus in April, reversing March’s A$1.024 billion deficit. The latest Gross Domestic Product (GDP) data, meanwhile, kind of disappointed expectations: the economy expanded by 0.3% QoQ in Q1 2026 (from 0.9%) and 2.5% YoY (from 2.5%), both prints missing consensus.

Still on the not-so-bright side, the labour market has been cooling over the last couple of months. Indeed, the Unemployment Rate ticked higher to 4.5% in April (from 4.3%), and the Employment Change dropped by 18.6K individuals (from the revised 23.3K gain seen in the prior month).

Regarding inflation, April data saw the Consumer Price Index (CPI) come in at 4.2% from a year earlier (from 4.6%), the Trimmed Mean ticking higher to 3.4% (from 3.3%), and the Weighted Median holding steady at 3.5% over the last twelve months. The pace of disinflation remains weak, although the direction is still broadly correct. Somehow reinforcing that view, the latest Melbourne Institute’s Consumer Inflation Expectations eased to 5.5% in May (from 5.6%).

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 shifts from engine to stabiliser

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

Let’s see some numbers: the economy expanded by 5.0% YoY in Q1, while Retail Sales gained 1.9% since the beginning of the year and a meagre 0.2% in the year to April. In addition, Industrial Production disappointed expectations last month after expanding by 4.1% from a year earlier and 5.6% YTD.

Of note is the strong recovery of the trade balance after May’s surplus widened to $105.43 billion from around $84.8 billion in the previous month, with both imports and exports expanding markedly.

However, business activity seems to be regaining traction after the National Bureau of Statistics (NBS) reported Manufacturing PMI at 50 in May (from 50.3), while Services returned to the expansion territory at 50.1 (from 49.4). At the same time, private gauges such as RatingDog still point to expansion, with Manufacturing coming in at 51.8 and Services improving to 54.4.

The disinflationary trend in China seems to have re-emerged after the CPI disappointed expectations and rose by 1.2% in the year to May, matching the previous reading. On a monthly basis, prices dropped by 0.1%, while Producer Prices gained 3.9% over the last twelve months, also holding steady from April’s prints.

And what about the People’s Bank of China (PBoC)? The central bank kept the Loan Prime Rates (LPR) unchanged at 3.00% for the one-year tenor and 3.50% for the five-year tenor at its latest gathering, matching the broad consensus.

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

The RBA stays firmly in wait-and-see mode

The RBA meets on Tuesday and is widely anticipated to leave its Official Cash Rate (OCR) unchanged at 4.35% following May’s 25 basis points hike. Furthermore, investors have trimmed their expectations of extra rate hikes for the rest of the year, pencilling in roughly 14 basis points of extra tightening by year-end.

While the decision on rates should be a non-event, market participants are predicted to dissect the central bank’s message and whether it has softened its views on domestic inflation in light of the re-opening of the Strait of Hormuz, dwindling geopolitical tensions and the latest inflation data in Oz.

It is worth recalling that, from its latest meeting, the central bank sees consumer prices staying higher for longer, with the CPI returning to target only around 2027–2028, while growth slows and unemployment gradually rises. A big part of that shift comes from the oil shock linked to the Middle East conflict, which is seen losing traction following the US-Iran deal over the weekend.

AUD/USD searches for its next catalyst

Base case

While above its key 200-day SMA around 0.6840, the pair’s outlook is expected to remain tilted to further advances. However, such a move needs a strong catalyst to emerge, and it feels heavily dependent on the broader backdrop: without a sustained improvement in risk sentiment or continued US Dollar weakness, the probability of extra gains could start to lose momentum.

Bull case

Further conviction is needed. If risk appetite picks up serious pace, spot could extend the uptrend and initially confront the 0.7200 hurdle before reaching the 2026 peak near 0.7280, just ahead of the minor 0.7300 barrier. Further up, the 2022 ceiling at 0.7593 awaits. Speculative positioning seems to be leaning toward this scenario for now.

Bear case

In the current volatile context, we should not rule out the loss of further momentum. If sentiment deteriorates, the Greenback gains extra momentum, or Chinese data continues to disappoint, spot could recede further and revisit recent lows in the 0.6980 zone.

The recovery appears to be there, although markets are still not fully convinced.

Positioning remains supportive despite the pullback

According to the latest Commodity Futures Trading Commission (CFTC) data, speculative net longs in the Australian Dollar fell to around 18.2K contracts for the week ending on June 9, extending the recent reduction in bullish exposure. Positioning has notably deteriorated over the past month, with net longs down by nearly 67K contracts over the last four reporting weeks.

Despite that unwinding, speculative sentiment remains relatively elevated from a historical perspective. The current net long position still ranks in the 90th percentile of its 5-year range, while the speculative exposure stands at 6%, corresponding to the 89th percentile. This suggests that, although investors have been trimming bullish bets aggressively, positioning remains considerably more constructive than it has typically been over recent years.

Of note here is that the net percentile and speculative exposure percentile are telling the same story. When both are sitting around 90, there is confirmation that exposure remains historically elevated.

What could move the Aussie next?

In the near term, the US Dollar, global risk sentiment, and geopolitics remain the main focus. Those remain the key drivers of price action. Next on tap on the Australian calendar will be the RBA interest rate decision, while China’s Industrial Production, Retail Sales and the Unemployment Rate should also entertain investors.

Key risks include a sharper slowdown in China, a more aggressive Fed, a change in investors' risk sentiment, or any shift in the RBA’s stance. Any of these could quickly destabilise the Australian currency in the near term.

Technical analysis

In the daily chart, AUD/USD trades at 0.7077, holding below the 55-day and 100-day simple moving averages (SMAs) at 0.7121 and 0.7084, respectively, which keeps the near-term bias capped despite the pair hovering just under the nearby horizontal barrier at 0.7079. The 200-day SMA at 0.6844 remains a deeper-layer support, while the Relative Strength Index (RSI) around 45 and a rising Average Directional Index (ADX) near 29 suggest a developing but still moderate bearish trend as price consolidates under this cluster of overhead resistance.

On the topside, immediate resistance is aligned at the 0.7079 horizontal level, followed closely by the 100-day SMA at 0.7084 and the 55-day SMA at 0.7121, with higher hurdles seen at 0.7278 and 0.7283 before a more distant barrier near 0.7661. On the downside, initial support is seen at the 200-day SMA around 0.6844 and the nearby horizontal floor at 0.6833, with further cushions at 0.6660 and 0.6593, while deeper levels at 0.6414 and 0.6373 would come into play if selling pressure intensifies.

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

Constructive outlook, but conviction is lacking

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

But the Australian Dollar is still a currency that trades heavily on sentiment. When confidence is strong, the Aussie performs well. When uncertainty creeps in, the Greenback 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.