AUD/USD Price Forecast: Bulls eye break above 0.7150-0.7170 resistance
- AUD/USD rises to one-month highs on Tuesday as the US Dollar weakens.
- US-Iran talks optimism and softer US PPI weigh on the Greenback.
- Hawkish RBA outlook and bullish technical setup support the pair.
AUD/USD trades with a mild positive bias on Tuesday, supported by a softer US Dollar (USD) as renewed hopes of US-Iran talks weigh on the Greenback and lift demand for risk-sensitive currencies like the Australian Dollar (AUD). At the time of writing, the pair is trading around 0.7132, its highest level since March 12.
Investors remain optimistic that the United States (US) and Iran could still reach an agreement, which has pushed Oil prices lower, easing immediate inflation risks and reducing pressure on central banks, particularly the Federal Reserve (Fed), to tighten monetary policy. At the same time, softer-than-expected US Producer Price Index (PPI) data has added to the downside pressure on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 98.00, its lowest level since March 2.
In contrast, a relatively hawkish outlook from the Reserve Bank of Australia (RBA), amid still-sticky inflation, continues to provide underlying support to the Australian Dollar.
From a technical perspective, the daily chart shows a broader bullish structure in AUD/USD, with prices breaking back above the 50-day Simple Moving Average (SMA) after bouncing from the March low near 0.6833, which closely aligns with the 100-day SMA.
The 50-day SMA near 0.7033 is turning higher and remains comfortably above the 100-day SMA near 0.6874, reinforcing a constructive medium-term trend and keeping the broader uptrend intact.
The 14-day Relative Strength Index (RSI) around 63 leans into bullish territory without yet signaling extreme overbought conditions, while the Moving Average Convergence Divergence (MACD) indicator has turned higher and crossed above the zero line, with histogram bars also turning positive, suggesting buyers remain in control.
On the downside, initial support is seen at the 50-day SMA near 0.7033. This level is particularly important as it sits just above the 0.7000 psychological mark, forming a near-term support cluster. A break below this zone could expose the latest breakout area around 0.6920, followed by the 100-day SMA near 0.6874.
On the upside, buyers are eyeing a break above the 0.7150-0.7170 zone, which has capped gains since early February. A sustained move above this barrier could open the door toward the 0.7200 psychological level and beyond.
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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