AUD/USD Price Forecast: Trades with negative bias below 0.7100; FOMC Minutes in focus
- AUD/USD struggles to capitalize on the previous day’s bounce from over a one-week low.
- The broader fundamental backdrop warrants caution before positioning for further losses.
- Traders now look to the FOMC Minutes for a fresh impetus amid a mixed technical setup.
The AUD/USD pair meets with a fresh supply during the Asian session on Wednesday and stalls the previous day's bounce from the 0.7030-0.7025 region, or an over one-week low. Spot prices currently trade around the 0.7075-0.7070 region, down just over 0.10% for the day, amid modest US Dollar (USD) strength, though the downside potential seems limited.
Investors now seem convinced that the US Federal Reserve (Fed) will lower borrowing costs in June and deliver at least two rate cuts in 2026. This, along with signs of progress in US-Iran nuclear talks, could act as a headwind for the safe-haven Greenback and support to the risk-sensitive Aussie. Apart from this, the Reserve Bank of Australia's (RBA) hawkish stance warrants some caution for the AUD/USD bears as the focus remains on the FOMC Minutes, due later today.
From a technical perspective, spot prices on Tuesday bounced off the 100-period Simple Moving Average (SMA) on the 4-hour chart, which is currently pegged near the 0.7020 region. The 100-period moving average trends higher, and the AUD/USD pair holds above it, preserving a positive near-term bias. Moreover, the Moving Average Convergence Divergence (MACD) hovers near the zero mark with negative readings shrinking, suggesting fading bearish pressure.
Furthermore, the Relative Strength Index (RSI) stands at 51 (neutral) and edges higher, aligning with a stabilizing tone. The bullish tone would persist while the AUD/USD pair maintains traction above the rising moving average dynamic support, with any pullbacks expected to remain contained. A MACD move into positive territory together with an RSI push higher from 51 would strengthen upside momentum. Otherwise, momentum would remain capped.
(The technical analysis of this story was written with the help of an AI tool.)
AUD/USD 4-hour 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.
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