AUD/USD Price Forecast: Eyes upside despite pullback from June high, around 0.7065

AUD/USD pulls back from its highest level since June 17 amid a modest US Dollar strength.
Traders await fresh developments surrounding the Middle East crisis ahead of the US NFP.
The constructive setup suggests that the path of least resistance for the pair is to the upside.

Haresh Menghani FXStreet

The AUD/USD pair edges lower during the Asian session on Thursday and moves away from the highest level since June 17, touched the previous day. Spot prices currently trade just below 0.7050, though the downside potential seems limited.

Despite optimism over a potential US-Iran deal and the reopening of the Strait of Hormuz, the US Dollar (USD) gains some positive traction and snaps a two-day losing streak as bears await further developments surrounding the Middle East crisis. This, in turn, is seen as a key factor exerting some pressure on the AUD/USD pair. Any meaningful decline, however, seems elusive ahead of China's Trade Balance data and the crucial US Nonfarm Payrolls (NFP) report on Friday.

From a technical perspective, spot prices struggle to capitalize on the previous day's move beyond the 100-day Simple Moving Average (SMA) and fail ahead of the 50% Fibonacci retracement level of the May-June decline. However, the Moving Average Convergence Divergence (MACD) indicator stays modestly positive. Moreover, the Relative Strength Index near 58 suggests constructive momentum without entering overbought conditions, hinting that dips could still attract buyers.

That said, traders might wait for some follow-through buying beyond the 50% level at 0.7070 before positioning for further gains. Against the backdrop of the recent bounce from the very important 200-day SMA, the breakout would expose the 61.8% level at 0.7120 and then the 78.6% retracement at 0.7191, ahead of the cycle high region near 0.7281.

On the downside, initial support is seen at the 38.2% retracement at 0.7020, with further demand emerging at the 23.6% level at 0.6958 and the 200-day SMA around 0.6920. A deeper slide toward the 0.6859 anchor would significantly weaken the current constructive tone.

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

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

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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