AUD/USD taps three-year highs on broad US Dollar weakness
- AUD/USD touched three-year highs on Monday, inches away from 0.7100.
- The Australian Dollar is catching a double boost from rising RBA rate expectations and a soft Greenback.
AUD/USD is trading near three-year highs after a strong break above the 0.7000 psychological level for the first time since February 2023, supported by the Reserve Bank of Australia's (RBA) surprise 25 basis point rate hike to 3.85% at its February meeting. The daily chart shows the pair in a well-defined uptrend, holding above both the 50-day Exponential Moving Average (EMA) near 0.6970 and the 200-day EMA around 0.6700. Price hit a high of 0.7094 on January 29 before pulling back to the 0.6960 area late last week as risk-off flows and a tech-led equity sell-off pressured the commodity-linked Australian Dollar. Monday's session saw buyers step back in, pushing AUD/USD up roughly 1% to trade around 0.7070 to 0.7085 on renewed US Dollar weakness, as the Federal Reserve (Fed) rate cut narrative gained traction with markets pricing two more cuts in 2026. The broader structure favors buyers while the pair holds above the 0.7000 round number on a daily closing basis.
On the 1-hour chart, Monday's rally from the 0.7010 area produced a clean bullish impulse, with price breaking above the 50 EMA and the 200 EMA on the lower timeframe. An ascending channel from the February 2 low near 0.6958 is guiding the advance, with intraday resistance at the upper channel boundary near 0.7090 to 0.7100. The Stochastic Oscillator is pushing toward overbought territory on the 1H, suggesting the pair could consolidate before another leg higher. Near-term support sits at the channel floor around 0.7030, with the 0.7000 level acting as a stronger structural base. A daily close back above 0.7094 would clear the January 29 high and open the door toward 0.7128 and the 0.7200 handle.
Looking ahead, Tuesday brings the Westpac Consumer Sentiment Index for February at 16:30 GMT and the NAB Business Confidence survey for January; both will provide further color on the domestic backdrop following the RBA's hawkish pivot, with markets pricing an 80% probability of another rate hike in May. On the US side, Tuesday's calendar is relatively light ahead of Wednesday's delayed Nonfarm Payrolls (NFP) for January, though several Fed governor speeches are scheduled throughout the week and could inject volatility if they push back on rate cut expectations.
Economic data coming up on Tuesday:
AUD/USD daily chart
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
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.
