AUD/USD Price Forecast: Double bottom takes shape as RSI approaches 50
- AUD/USD gains as a softer US Dollar and hawkish RBA stance support the Australian Dollar.
- A potential double bottom suggests buyers are beginning to regain ground.
- Momentum improves, but the pair remains below key daily moving averages.
AUD/USD edges higher on Tuesday, extending its gains for the third consecutive day, supported by a pullback in the US Dollar (USD) from the 18-month highs touched last week, while the Reserve Bank of Australia’s (RBA) hawkish stance keeps underlying demand for the Australian Dollar (AUD) intact. At the time of writing, the pair trades around 0.7002, near one-week highs.
The technical picture shows signs of improvement following a potential double bottom near 0.6900, suggesting buyers are gradually returning after several weeks of selling pressure. However, AUD/USD remains below key moving averages on the daily chart, keeping the recovery in check.
The Moving Average Convergence Divergence (MACD) is marginally positive, while the Relative Strength Index (RSI) recovers from oversold territory to near 49, indicating that selling pressure has eased but buyers have yet to gain firm control.
On the topside, initial resistance is seen at the 38.2% Fibonacci retracement at 0.7026, followed by the 100-day SMA at 0.7035 and the 200-day SMA at 0.7047, with a stronger cap emerging around the 50.0% retracement at 0.7067 and the 50-day SMA at 0.7077. Further up, the 61.8% retracement at 0.7107, the 78.6% level at 0.7165 and the cycle high zone near the 100.0% retracement at 0.7238 form a broader resistance band.
On the downside, immediate support emerges at the 23.6% retracement at 0.6976. A break below this level could open the door for a retest of the 0.6895-0.6900 support zone, where the potential double bottom has formed.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
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