AUD/USD Price Forecast: Rangebound with bearish bias intact below key SMAs
- AUD/USD remains under pressure as the US Dollar strengthens across the board
- AUD/USD consolidates between 0.6480 and 0.6520 following a Head-and-Shoulders breakdown.
- The pair remains capped below 50-day and 100-day SMAs, keeping short-term bias bearish.
The Australian Dollar (AUD) trades on the back foot against the US Dollar (USD) on Tuesday, weighed down by broad-based Greenback strength amid cautious optimism that the US-China trade conflict could ease.
At the time of writing, AUD/USD trades near 0.6491, down roughly 0.30% on the day. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is hovering around one-week highs near 98.93, extending gains for the third straight day.
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From a technical perspective, AUD/USD continues to consolidate in a narrow range between 0.6480 and 0.6520, following a confirmed Head-and-Shoulders breakdown on the daily chart. The pair remains capped below both the 50-day and 100-day Simple Moving Averages (SMAs), reinforcing the bearish bias.
Repeated lower-wick shadows on recent candles suggest dip-buying interest, yet momentum remains weak. The Relative Strength Index (RSI) holds near 41.5, indicating subdued bullish momentum and room for further downside before oversold conditions emerge. Meanwhile, the Average Directional Index (ADX) stands around 20.7, signaling a lack of a strong trend.
On the downside, immediate support is located at the base of the current range, around 0.6480. A decisive break below this level would expose 0.6450, which closely aligns with last week’s low and marks the next key support. A sustained move beneath that area could confirm renewed bearish momentum, opening the door toward 0.6415, the August 22 low, and potentially beyond.
On the upside, initial resistance is seen near 0.6535, which coincides with the 100-day SMA. A sustained move above this level would challenge the 0.6550-0.6560 area, aligned with the 50-day SMA and the neckline of the earlier Head-and-Shoulders pattern. A daily close beyond that zone could shift the near-term bias to neutral, opening the path toward 0.6600.
Overall, AUD/USD maintains a bearish-to-neutral outlook, with sellers likely defending rallies while the pair trades below key moving averages.
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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