AUD/USD Price Forecast: Extends the range play around 0.7000; bearish bias remains
- AUD/USD struggles to attract any meaningful buyers and remains confined in a range.
- The Iran uncertainty and the hawkish Fed underpin the USD, capping the currency pair.
- The bearish technical setup suggests that the path of least resistance is to the downside.
The AUD/USD pair extends its sideways consolidative price move for the third consecutive day and trades just above the 0.7000 psychological mark during the Asian session on Monday.
The global risk sentiment takes a hit in reaction to fresh geopolitical developments over the weekend and renewed closure of the Strait of Hormuz by Iran. This, along with the US Federal Reserve's (Fed) hawkish tilt, helps the safe-haven US Dollar (USD) stall its modest pullback from the highest level since May 2025, touched on Friday, which is seen acting as a headwind for the AUD/USD pair.
That said, the Reserve Bank of Australia's (RBA) signal that additional rate hikes were possible if inflation persists limits the downside for the Australian Dollar (AUD). From a technical perspective, the AUD/USD pair has been showing resilience below the 61.8% Fibonacci retracement of the March-May upswing, warranting some caution for bearish traders and positioning for any further losses.
However, the recent breakdown below the 100-day Simple Moving Average (SMA) and the 50.0% Fibonacci retracement of the March-May upswing backs the case for a further near-term depreciation. Moreover, momentum oscillators suggest persistent downside pressure, despite the AUD/USD pair stabilising above a key Fibonacci support. In fact, the Relative Strength Index (RSI) sits near 37.
Furthermore, the Moving Average Convergence Divergence (MACD) indicator hovers slightly below zero with a negative line. That said, it will still be prudent to wait for acceptance below the 61.8% Fibo. before positioning for further losses to the 78.6% level around 0.6928 and the prior swing base near 0.6832.
On the topside, initial resistance emerges at the 50.0% retracement at 0.7055, followed by the 100-day SMA clustered near 0.7085. A sustained strength above there would expose the 38.2% retracement at 0.7108 and the 23.6% level at 0.7173 as subsequent barriers.
(The technical analysis of this story was written with the help of an AI tool.)
AUD/USD daily 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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