AUD/USD slides nearly 1% to test the 0.7000 handle
- The Australian Dollar dropped again as Middle East risk-off flows dominate.
- Australia's Q4 GDP grew 0.8% QoQ (2.6% annualized), the fastest pace in almost three years, but rising Crude Oil prices from the Strait of Hormuz closure are clouding the RBA's inflation outlook ahead of its March 16-17 meeting.
- Friday's US NFP report is forecast at around 60K for February, down sharply from January's 130K, with the unemployment rate expected to hold at 4.3%.
AUD/USD fell about 1% on Thursday, wrapping the day up near the 0.7010 level after testing below the key 0.7000 handle intraday. The pair has now pulled back sharply from Tuesday's bounce, with two consecutive bearish sessions erasing most of the week's early gains. Price continues to chop within the roughly 150-pip consolidation band between 0.7000 and the year-to-date high close to 0.7150 that has defined the range since early February.
The Reserve Bank of Australia (RBA) hiked rates to 3.85% in February, its first increase since late 2023, and Governor Michele Bullock said on Tuesday that the March meeting is "live" for another move. Wednesday's Q4 Gross Domestic Product (GDP) data showed the economy expanded 0.8% in the final quarter of 2025, with annual growth hitting 2.6%, the strongest pace since early 2023. While the data keeps hawkish expectations alive, market pricing currently implies only around a 30% chance of a March hike, with a move to 4.10% in May still fully priced. Surging Crude Oil prices, driven by the effective Strait of Hormuz shutdown and still-brewing Iranian war, are adding fresh inflation concerns that Bullock flagged this week as a risk that could "reignite domestic inflationary pressures."
On the US Dollar (USD) side, Federal Reserve (Fed) officials continue to publicly debate the possibility of raising rates if inflation stays above target, with key policymakers adamant that interest rate cuts are still on-track this year. Safe-haven demand continues to support the Greenback as the Iran conflict enters its sixth day. Attention turns to Friday's Nonfarm Payrolls (NFP) report, where consensus sits around 60K for February, a sharp slowdown from January's above-trend 130K print.
AUD/USD daily chart
Technical Analysis
In the daily chart, AUD/USD trades at 0.7009. The near‑term bias is mildly bullish as price holds well above the rising 50‑day and 200‑day exponential moving averages, keeping the broader uptrend intact despite the latest pullback from the 0.71 area. The Stochastic oscillator has retreated from overbought territory toward mid‑range readings, indicating that upside momentum has cooled but not reversed, which aligns with a pause within an existing advance rather than a topping pattern.
Initial support emerges at 0.6960, where the latest swing low aligns with proximity to the 50‑day EMA, and a break below this area would expose deeper downside toward 0.6920. Further support sits near 0.6890, guarding the base of the late‑January consolidation band. On the topside, immediate resistance is seen at 0.7045, followed by 0.7085, with a daily close above the recent 0.7120 peak required to reassert the broader bullish structure and open the way to higher highs.
(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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