AUD/USD slips from multi-year highs as Aussie trade slumps and Dollar bounces
- The US Dollar Index found support near 97.60 as Iran de-escalation optimism faded and traders trimmed risk-on positions.
- The RBA hiked the cash rate 25 basis points to 4.35% on Tuesday in an 8-1 vote, the third consecutive hike of 2026.
- Australia's March trade balance flipped to deficit at -A$1.84B against a A$4.25B consensus, as exports fell 2.7% MoM.
AUD/USD edged about 0.2% lower on Thursday to around 0.7205, easing back from a multi-year peak just shy of 0.7280 reached earlier in the session. The pullback follows a strong rally of roughly 175 pips off the May 1 swing low near 0.7105, with the move building on a sequence of higher lows since late April before the upside stalled into fresh resistance.
On the US Dollar (USD) side, the dominant driver remains the US-Iran ceasefire and the Strait of Hormuz situation. Wednesday saw the Dollar Index sink toward 97.60, a three-month low, as the White House signaled it was nearing a memorandum of understanding with Tehran and President Trump paused the US-led effort to assist stranded vessels exiting the strait while talks continue. The optimism sapped safe-haven demand for the Greenback and lifted risk-sensitive currencies like the Aussie, though Thursday's modest USD bounce points to caution as the hope trade unwinds. Friday's US Nonfarm Payrolls (NFP) release, with consensus close to 62K against a prior 178K, is the next major test.
For the Australian Dollar (AUD), the Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points to 4.35% on Tuesday, the third consecutive hike of 2026 in an 8-1 vote, while signaling space to pause and monitor how the Middle East energy shock feeds through to domestic prices. Thursday's March trade balance, however, undermined the hawkish backdrop, flipping to a A$1.84B deficit on a 2.7% MoM drop in exports against expectations for a A$4.25B surplus. The miss is the chief domestic factor capping the rally close to multi-year highs.
AUD/USD 4-hour chart
Technical Analysis
In the four-hour chart, AUD/USD trades at 0.7203. The pair holds a constructive near-term tone as price trades above the 200-period exponential moving average (EMA) at 0.7125, suggesting the broader recovery structure remains intact despite the recent pullback from last week’s highs. The Stochastic RSI has eased from overbought but remains in positive territory, hinting that upside momentum is moderating rather than reversing at this stage.
On the downside, immediate support is seen at the 200-period EMA around 0.7125, where a break would weaken the bullish structure and open the door to a deeper correction toward prior range lows. As long as buyers defend this moving average on closing bases, the broader bias would likely stay tilted to the upside, with any dips toward the EMA treated as potential buy-the-dip opportunities in the absence of a clear momentum breakdown.
(The technical analysis of this story was written with the help of an AI tool.)
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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