AUD/USD Forecast

The AUD/USD currency pair has captured significant attention among forex traders during recent global economic shifts. The exchange rate between the Australian Dollar (AUD) and the U.S. Dollar (USD) has seen notable fluctuations due to evolving central bank policies, notable economic data releases and recent political events.

In this comprehensive forecast, Benzinga will explore the latest market analysis, technical indicators and fundamentals impacting the AUD/USD pair. Whether you're a seasoned trader or new to the forex market, understanding these dynamics is vital for making informed trading decisions, so let’s get started!

Current Market Analysis

Recent AUD/USD Market Overview

The AUD/USD pair is currently experiencing a rather dynamic market phase after a notable decline seen since the 0.6942 high from Sept. 30, 2024. In the early part of this year, the pair peaked at around 0.6302 on Jan. 6 and then dropped sharply to make a notable low at 0.6131 on Jan. 13 while exhibiting bullish RSI divergence.

The pair's exchange rate movement has since remained quite volatile within that aforementioned 0.6131-0.6302 exchange rate range, which appears to be an upwardly corrective move with the overall look of a fourth wave. This suggests another low will materialize once the subsequent fifth wave lower commences.

Current market influences include the return of U.S. President Donald Trump's tariff threats and the potential for an interest-rate cut by the Reserve Bank of Australia (RBA). These elements have contributed to the pair's recent fluctuation within the 0.6200-0.6300 range.

Factors Influencing the AUD/USD Market

Several key factors are presently influencing the AUD/USD market. These include:

• Trade Policy: U.S. President Donald Trump's recent threats to impose new tariffs on Chinese goods can affect Australia significantly due to its trade dependency on China.
• Central Bank Policies: With the RBA potentially easing interest rates from February onward, this dovish stance could further negatively impact the AUD's exchange rate versus the USD.
• Economic Data: Reports from the U.S. and Australia, including U.S. Purchasing Manager’s Index (PMI) data and Australia's latest jobs report, have played vital roles in shaping the currency pair's direction. The S&P Global U.S. Manufacturing PMI index recently fell to 49.4 in December 2024 from 49.7 in the previous month. Australia's latest jobs report shows the unemployment rate remaining at 4.0% in December 2024, with employment increasing to 14,573,800.

Technical Analysis

Now, let’s take a closer look at the technical analysis picture for AUD/USD. A daily chart for the pair’s exchange rate appears below.

Support and Resistance Levels

The AUD/USD pair shows notable support at around 0.6131, while resistance sits near 0.6302. A break above the resistance level could see the pair aim for the 0.6340 mark and eventually eye the 0.6400 level.

On the other hand, if the pair fails to hold the support level at 0.6131, that breakdown event might push the pair lower toward the round-number support point at 0.6100 and potentially even down to the April 2020 low of 0.5990 as the 5th and final wave of the overall decline progresses.

Technical Indicators

• Moving Averages: The AUD/USD pair is currently hovering just below its 50-period Simple Moving Average (SMA), which is declining and situated near 0.6324. The 100-day SMA slows lower at 0.6512, suggesting an upside correction within an overall falling trend.
• Relative Strength Index (RSI): In early January, the 14-day RSI showed a higher low while the pair made lower lows, indicating waning downside momentum and demonstrating potential bullish divergence for the pair. This could signal a near-term upside reversal that has the appearance of a fourth wave.
• Trend Lines: The pair's movement is slightly upward, but with potential resistance nearby, it could face notable hurdles above the 0.6349 level, the major low point seen on Aug. 5, 2024.

Fundamental Analysis

The economic and geopolitical fundamentals of Australia and the United States influence the market behavior seen in the AUD/USD pair. These factors include:

Economic Indicators

• GDP Growth: Australia's GDP growth rate can significantly affect the AUD as it indicates economic health and productivity.
• Inflation Rates: Both Australia and the U.S. have shown varied inflation rates. The US's most recent inflation report showcased a slight rise while Australia's headline Consumer Price Index (CPI) fell in Q3 2024.
• Interest Rates: The RBA and the Federal Reserve's interest rate movements weigh heavily on the currency's direction. The RBA's potential easing trajectory might lead to a weaker AUD in the near and longer terms.

Political and Global Factors

• Trade Relations: Ongoing trade dynamics, especially those focused on the return of U.S. President Donald Trump’s tariff threats, can weigh heavily on the AUD/USD pair, especially when China is involved.
• Economic Health of Trading Partners: China's economic condition, as Australia's largest trading partner, directly influences the relative strength of the AUD. Recent reports have indicated some modest improvements in China's economy.

Forecast for the AUD/USD Pair

Short-Term Scenario

The AUD/USD may swing between 0.6200 and 0.6300 in the short term. A break above the upper resistance level could push the exchange rate significantly higher, but upside challenges for the AUD still persist, given the risk of potential interest rate cuts from the RBA.

Long-Term Scenario

Long-term projections suggest a cautious approach to this currency pair. If the RBA implements further rate cuts and Trump's tariffs materialize, the AUD may see further downside versus the USD, potentially taking the pair downward toward the psychological 0.6000 mark. Conversely, positive economic developments in China and stable U.S. economic policies could provide some support for a rebound.

Corrective Upside Then Lower Looks Probable for AUD/USD

Overall, the most probable AUD/USD forecast in the short term suggests the pair will continue experiencing corrective upside movements within the 0.6200-0.6300 range. However, potential future interest rate cuts by the RBA and geopolitical uncertainties, including the specter of the U.S. imposing trade tariffs against China, may limit further gains for the pair and prompt further downside movement in the longer term.

To trade the volatile but potentially profitable AUD/USD market, keeping up to date with the latest market analysis and trends is key. Understanding the technical and fundamental factors involved in exchange rate movements can help you make better trading decisions.

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