AUD/USD hung out to dry on familiar low end

AUD/USD continues to keep a tight grip on 0.6200.
Market sentiment drifted in favor of safe havens to start 2025.
Aussie traders await further hints from RBA on policy direction before picking a side.

Joshua Gibson FXStreet

AUD/USD tried and failed to spark a bull run during the first trading session of 2025, rising on thin volumes before collapsing back into the 0.6200 handle in the later hours of the day. A broad-market push into the safe haven Greenback kept the Aussie pair on the defensive, and the AUD is mired in congestion on the weak side of two-year lows.

The economic data calendar is largely dark on the Antipoodean side for the rest of the week, leaving investors to grapple with US Purchasing Managers Index (PMI) figures due on Friday and a cloudy picture on the Aussie’s interest rate differential outlook.

The Federal Reserve (Fed) is poised to make fewer interest rate cuts through 2025 than previously expected, keeping the US Dollar well-bid across the board alongside a general malaise that has struck market participants in recent months. Market flows are still constrained by the New Year’s holidays that shuttered markets during the midweek market session, but a wobbly stance to fresh volumes at the outset of the new trading season bode poorly for near-term gains for the Aussie.

US ISM Manufacturing PMI survey results on Friday are expected to hold flat at a contractionary 48.2.

AUD/USD price forecast

AUD/USD bulls will be look for a fresh breakout to the topside in the coming days as bids appear to be pumping the brakes on further declines. However, a fresh round of short-selling isn’t entirely off the table, especially if the bottom falls out of near-term price action and sends bids below last week’s floor set near 0.6180.

AUD/USD daily chart

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

GBP/USD rebounds above 1.3200 as USD loses traction

GBP/USD starts the week on a bullish note and advances toward 1.3250 on Monday. The pair recovers ground as the US Dollar uptrend falters and traders resort to profit-taking ahead of Tuesday's US-Iran peace talks and Fed Chair Kevin Warsh's appearance on Wednesday at the ECB Forum.

EUR/USD clings to modest gains near 1.1400

EUR/USD gains traction on Monday and trades moderately higher on the day above 1.1400, helped by a broadly weaker US Dollar. Traders continue to assess the developments surrounding talks to end the US war with Iran. The European Central Bank's annual forum and the US June employment data will be the highlights later this week.

Gold stays in red near $4,050 as US-Iran clash revives inflation fears

Gold price remains in the negative territory around $4,050 in Monday's European trading. The bullion struggles as military clashes between the United States and Iran in the strategic Strait of Hormuz have revived inflation concerns, bolstering Fed rate hike expectations. However, a broad US Dollar retreat is helping limit Gold's downside.

Bitcoin four-year cycle: BTC risks 75% drawdown with four months of bear market still ahead

Bitcoin price continues to trend downward below the $60,000 support zone after losing over 50% of its value since the $126,199 high in October. Bitcoin’s four-year cycle, measured from cycle tops to bottoms, suggests that four months of a bear market are still ahead.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.