Australian Dollar Price Forecast: Upside momentum picks up pace

AUD/USD waits for a clearer signal

Directional bias: Neutral to bullish above the 200-day SMA, although repeated difficulty clearing 0.7000 leaves the pair exposed to another rejection.

Preferred approach: Patience may offer a better risk-reward profile than chasing the pair immediately below resistance. A confirmed break above the 0.7000 threshold or a pullback that holds around the 200-day SMA would provide a cleaner setup.

Bullish trigger: A convincing move above 0.7000, ideally supported by firm Australian data, stronger expectations of another RBA rate increase, lower US yields or an improvement in risk appetite.

Bearish trigger: Another failure at 0.7000, accompanied by renewed US Dollar strength or a generalised deterioration in market sentiment.

Key invalidation level: A daily close below the 200-day SMA would weaken the overall positive trend and raise the risk of a deeper retracement in the short-term horizon.

Three paths from the 0.7000 crossroads

Base case: The range holds

AUD/USD could remain trapped between the 0.7000 psychological barrier and the 200-day SMA above 0.6900 while traders wait for a sufficiently strong catalyst.

Australia’s relatively solid domestic fundamentals and the Reserve Bank of Australia’s (RBA) cautious stance should discourage aggressive selling. At the same time, persistent demand for the Greenback and geopolitical uncertainty could prevent an immediate breakout.

Until either boundary gives way, spot may be better treated as a side-lined trade than a convincing directional move.

Bull case: Buyers establish a foothold above 0.7000

A sustainable breach above 0.7000 would suggest that buyers have absorbed the selling pressure surrounding this closely watched threshold.

The breakout would carry greater conviction if supported by:

• Firmer-than-expected Australian data releases.
• A stable or lower Unemployment Rate.
• Increased expectations of another RBA rate hike.
• Lower US yields and a softer US Dollar.
• An improvement in risk-linked sentiment.

Under this scenario, there is a minor target at the weekly top at 0.7088 (June 15), followed by the next important medium-term target at 0.7200 (May 29), all preceding the 2026 ceiling near 0.7280.

The sizeable build-up of speculative AUD shorts could add fuel to the move if a confirmed breakout forces bearish traders to unwind their positions.

Bear case: Another rejection opens the door to 0.6900

A fresh failure around 0.7000 could bring sellers back into the market, particularly if the Greenback regains momentum or global risk appetite deteriorates.

The next major test would then be the 200-day SMA beyond the 0.6900 level. A daily close below this area would damage the wider bullish structure and increase the probability of a deeper correction.

Once that support gives way, previous resistance and consolidation zones below 0.6900 could return to focus.

Australia’s economy continues to hold its ground

Australia’s domestic backdrop remains relatively healthy, supported by firm demand, positive growth and a resilient labour market.

July business surveys reinforced that picture. The Manufacturing PMI improved to 52.0 from 51.5, while the Services PMI rose to 53.6 from 50.5, leaving both sectors comfortably in expansionary territory.

The June labour market report was also encouraging. The Unemployment Rate held steady at 4.4%, while Employment Change jumped by 76.3K following a revised 44K increase in May.

Still, the picture is not uniformly positive. Australia recorded an A$3.018 billion trade deficit in May, reversing April’s A$1.383 billion surplus. Economic growth also slowed to 0.3% quarter-on-quarter in the first three months of 2026, down from 0.9%, while annual growth held at 2.5%.

Overall the figures suggest a resilient economy but perhaps not strong enough on its own to trigger a sustained breakout in AUD/USD.

Inflation leaves the RBA with unfinished business

Australian headline inflation eased to 3.9% in the second quarter from 4.1%. Underlying price pressures, however, remained uncomfortable. Both the Trimmed Mean and Weighted Median measures rose to 3.6% from 3.5% in the previous quarter.

Consumer inflation expectations offered some relief, falling to 4.7% in July from 5.5%, according to the Melbourne Institute. Even so, inflation remains too high for the RBA to declare victory.

The central bank left its Official Cash Rate (OCR) unchanged at 4.35% in June and maintained a cautious message. Policymakers warned that they may still need to tighten further if inflation proves more persistent than expected.

Governor Michele Bullock struck a more balanced tone. While keeping the possibility of another rate increase alive, she suggested there was no immediate need to tighten again as the economy was broadly evolving in line with expectations.

Markets expect the RBA to remain on hold at its August meeting while continuing to price the possibility of additional tightening before year-end. So far, markets have pencilled in just over 12 basis points of extra tightening by the turn of the year.

That stance provides the AUD with some domestic support, but it is not necessarily enough to trigger an immediate rally. Further gains may require incoming data to strengthen the case for another rate increase.

China steadies but offers little additional lift

China remains an important influence on the Australian currency, although it is currently providing stability rather than a powerful tailwind.

The Chinese economy expanded by 4.3% YoY in the April-June period, Industrial Production rose by 5.3% in the year to June, and Retail Sales increased by a more modest 1.0%.

Business surveys suggest that activity is stabilising. The official Manufacturing and Services PMIs remained slightly above the 50 threshold, while private-sector gauges continued to signal expansion.

China’s trade surplus also widened to $125.62 billion in June from $105.4 billion, supported by stronger imports and exports.

Meanwhile, the People’s Bank of China (PBoC) left its Loan Prime Rates (LPR) unchanged, keeping the one-year rate at 3.00% and the five-year rate at 3.50%.

China is therefore neither delivering a major boost nor creating a significant drag. Unless the data show a clearer acceleration or deterioration, Chinese releases may cause short-term volatility without setting a lasting direction for the pair.

Bearish positioning remains heavy, but momentum is fading

The speculative mood on the Australian Dollar remained bearish in the week ending July 28. Commodity Futures Trading Commission (CFTC) data showed net short positions rose to almost 40K contracts from 37.7K a week before.

However, the weekly increase in bearish exposure has decelerated to around 2.3K contracts from 7K previously. That said, the non-commercial players are still building on their downside positions, but with less urgency than earlier this summer.

Open interest also increased slightly to around 229.8K contracts from just above 225K, indicating a slight increase in market participation. In addition, speculative exposure decreased as well to -17.4% (from -16.7%).

The broader trend points to a similar loss of momentum. Indeed, the 4-week change improved to -22.3K contracts from -24.7K, suggesting that cumulative bearish flows are gradually cooling.

Overall, speculators remain firmly bearish on the Aussie, but that view is becoming more established than aggressive. This means the AUD position is increasingly reliant on incoming economic data.

It also creates an interesting asymmetry. Disappointing data could reinforce the prevailing bearish bias, but a convincing improvement in the outlook could trigger a sharper reaction as crowded short positions are unwound.

What’s next for AUD?

Australian and Chinese Trade Balance figures will be the next major tests for the Aussie. The release could better understand the latest performance of the external sector, as well as domestic and international consumer demand.

Technical analysis

In the daily chart, AUD/USD trades at 0.7053, holding a constructive near-term bias as it sits just above the 100-day simple moving average (SMA) at 0.7052 and the 55-day SMA at 0.7016, while also keeping a clear cushion above the 200-day SMA at 0.6918. The Relative Strength Index at 60 hints at firm but not yet overbought bullish momentum, though the Average Directional Index down near 14 suggests the broader trend is still relatively weak and susceptible to consolidation phases rather than a strong directional breakout.

On the topside, initial resistance is aligned with the horizontal barrier at 0.7079, ahead of a more substantial supply zone around 0.7278 and 0.7283, with a stronger cap emerging much higher at 0.7661. On the downside, immediate support is provided by the 100-day SMA at 0.7052, followed by the 55-day SMA at 0.7016 and then the 200-day SMA at 0.6918; a deeper slide would expose horizontal floors at 0.6833 and then 0.6660, before 0.6593 and the lower supports at 0.6414 and 0.6373 come into view.

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

The line in the sand remains 0.6900

AUD/USD retains a constructive medium-term structure above its 200-day SMA, but the immediate outlook remains uncertain while the pair struggles to secure a foothold above 0.7000.

The most attractive setup remains conditional. Confirmed acceptance above 0.7000 would favour further gains and could trigger a positioning-driven short squeeze. Another rejection, however, would leave the pair exposed to a return toward 0.6900.

Until one of these boundaries breaks, AUD/USD remains caught between supportive Australian fundamentals and an external backdrop still dominated by the US Dollar, geopolitical uncertainty and only moderate support from China.