AUD/USD Price Forecast: Hits multi-year high past 0.7100
- AUD/USD climbs and hits a three-year high at 0.7168.
- Break above 0.7168 would target 0.7200, then 0.7250 and 0.7300.
- Failure below 0.7100 risks a pullback toward 0.7053 and the 0.7000 level.
The Australian Dollar (AUD) surges nearly 1% on Tuesday on speculation that the Reserve Bank of Australia (RBA) might raise rates at its March meeting. At the time of writing, the AUD/USD pair trades at 0.7131, after reaching a three-year high at 0.7168.
AUD/USD Price Forecast: Terminal outlook
The AUD/USD technical picture is bullish-biased after hitting its highest level since June 2022, poised to extend its gains if it closes daily above the 0.7100 figure.
The Relative Strength Index (RSI) reveals that momentum is bullish, but the index needs to clear the previous high of 64, which could open the door to further upside in the AUD/USD pair.
If AUD/USD surpasses 0.7168, the next resistance would be the 0.7200 figure. A breach of the latter will expose the 0.7250 mark, followed by 0.7300.
Conversely, if AUD/USD tumbles below 0.7100, it opens the door for a pullback. The first support would be 0.7053, the March 10 low, followed by the 0.7000 mark. On further weakness, the next area of demand would be the March 9 swing low of 0.6956.
AUD/USD Price Chart – Daily
Australian Dollar FAQs
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.
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.
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.
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.
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
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
