Australian Dollar Trend Forecast: Key Factors Behind the Shift from a Decade of Sluggishness to a Rebound Opportunity

As the fifth-largest currency by trading volume worldwide, the Australian dollar (AUD) often influences global forex markets. Over the past decade, AUD trend forecasts have become a hot topic among investors because this seemingly stable “commodity currency” actually faces complex fundamental battles. Why has the AUD remained weak over the long term? What are the key variables in predicting its movement? This article will analyze the investment opportunities and risks of the AUD from multiple perspectives.

Why has the AUD been persistently weak? The fate and cycle of commodity currencies

There’s a reason why the AUD is called a “commodity currency.” Australia’s economic structure heavily relies on exports of bulk commodities like iron ore, coal, and natural gas. This means that as long as global raw material prices fluctuate, the AUD exchange rate will also experience significant swings. While it appears to offer high-yield carry trade opportunities, it also harbors long-term depreciation risks.

From a high of 1.05 in early 2013, the AUD/USD has depreciated over 35% by 2023. During the same period, the US dollar index (DXY) rose by 28.35%. This isn’t just an AUD issue; the euro, yen, and Canadian dollar against the dollar have also depreciated. This reveals a deeper truth: the past ten years have been a comprehensive strong-dollar cycle, with the AUD merely a passive participant in this larger trend.

From a technical perspective, the ten-year trend of AUD/USD resembles a slow downward channel. Even when rebounds occur, it’s difficult for the AUD to sustain high levels. This reflects that the US economy remains more resilient than other developed countries, with the Federal Reserve adopting a more hawkish (or tighter) policy stance, attracting global capital flows into dollar assets. Meanwhile, domestic economic growth in Australia has slowed, and interest rate advantages have diminished, leading to ongoing capital outflows.

Key data shows that Australia’s recent economic performance has been less than ideal. In Q4 2024, the AUD/USD plunged sharply, with an annual decline of about 9.2%. Entering 2025, amid escalating global trade tensions, the AUD briefly fell to 0.5933, hitting a five-year low. Analysts point out that the main reason is US tariffs impacting global trade and raw material export demand, directly weakening the AUD’s support as a commodity currency.

The three main factors influencing AUD trend forecasts

To understand AUD trend predictions, focus must be placed on three core variables: Australia’s own policies, the US dollar’s direction, and China’s economy.

First, the Reserve Bank of Australia (RBA) policy stance and domestic inflation

Australia’s inflation has always been a key concern for the RBA. In Q3, CPI rose 1.3% month-over-month, exceeding the previous quarter’s 0.7% and surpassing market expectations. The RBA has repeatedly emphasized that core inflation pressures in housing and services sectors remain, and only when inflation enters a sustainable downward trajectory will it consider further easing.

This means that in the short term, the likelihood of RBA rate cuts is limited. In contrast, the Federal Reserve is gradually lowering rates, which narrows the interest rate differential. When rate cut expectations weaken, the AUD may receive short-term support because it appears more attractive relative to other major currencies. However, this support is often fragile, as it relies on relative advantage; if the Fed halts rate cuts or shifts to rate hikes, the AUD will lose this edge.

Second, the US dollar index and US economic performance

The USD is the biggest opponent of the AUD. The Fed cut the federal funds rate to 3.75%-4.00% in October, but Chair Powell indicated that further rate cuts in December are unlikely. More importantly, since mid-year, the dollar index has rebounded about 3% from a low of 96, with a rising likelihood of breaking above 100.

The general rule is: a strong dollar correlates with a weak AUD, often inversely. If US economic data (GDP, employment) remains robust, the Fed has little reason to cut rates, and the dollar will continue to strengthen, exerting downward pressure on the AUD.

Third, China’s economy and bulk commodity demand

This is the “lifeline” for the AUD. China is the largest buyer of Australia’s resource exports. Demand for iron ore, coal, and natural gas depends entirely on China’s economic health. When China’s economy is strong, raw material demand surges, supporting the AUD. Conversely, if China’s property market remains sluggish and growth slows, demand for commodities declines, and the AUD loses an important support.

The overall outlook for major currency pairs: AUD/USD, RMB, MYR forecasts comparison

AUD/USD trend framework

AUD/USD is the most central currency pair in AUD trend forecasts. Previous predictions included Morgan Stanley’s expectation that AUD/USD could rise to 0.72 (based on hawkish RBA stance and strong commodities); UBS’s more conservative view suggests the rate might stay around 0.68 by year-end; CBA economists are more cautious, expecting a short-lived rebound with a possible peak around March 2026 before falling back.

Technically, AUD/USD currently oscillates between 0.63 and 0.66. If inflation data remains favorable and the economy stabilizes, the AUD might test above 0.66. But if global risk appetite deteriorates or the dollar strengthens again, the pair could fall back toward 0.63. Key support is at 0.6373 (recent 10-day moving average), resistance at 0.6450.

AUD/RMB trend mechanism

AUD/RMB’s performance closely follows AUD/USD, but since RMB fluctuations are relatively muted, AUD/CNY typically shows smaller declines than AUD/USD. Stable trade relations between China and Australia support the exchange rate, but RMB movements are also influenced by Chinese monetary policy and US-China relations.

In the short term, with RMB relatively stable, AUD/CNY may fluctuate within 4.6–4.75. If China’s economy weakens, the pair could briefly rise toward 4.8.

AUD/MYR regional outlook

The Malaysian ringgit is also sensitive to commodity prices, but Malaysia’s economic structure differs from Australia’s. Amid global economic uncertainties, AUD/MYR may range between 3.0 and 3.15. If Australia’s economic data worsens further, it could test support near 3.0.

AUD trading opportunities: short-, medium-, and long-term strategies and risk management

Short-term trading (1-3 days): monitoring key data and technical breakouts

For short-term traders, AUD trend forecasts require attention to two directions:

• Bullish opportunities emerge when prices stabilize above resistance at 0.6450. If AUD/USD breaks above and confirms, consider small long positions targeting the 200-day moving average at 0.6464, then aiming for psychological resistance at 0.6500. Triggers include US GDP or non-farm payrolls weaker than expected (implying higher chance of rate cuts) or Australian CPI unexpectedly rising. Stop-loss at 0.6420.

• Bearish opportunities occur if the price falls below the 10-day EMA at 0.6373. Short positions can target 0.6336 (recent low) or even 0.6300. Triggers include strong US data or a sharp cooling of Australian inflation. Stop-loss at 0.6400.

Before data releases, it’s advisable to stay cautious, reduce positions, or exit temporarily, as volatility may increase.

Medium-term outlook (1-3 weeks): fundamental and technical combined judgment

Bullish scenario: if US employment data softens, inflation declines, and trade tensions ease, the AUD could benefit from risk sentiment, targeting 0.6550–0.6600. A technical breakout above the 200-day moving average (0.6464) would confirm a medium-term reversal, prompting increased long positions.

Bearish risks: rising Australian inflation forcing the RBA hawkish, unexpected dollar weakness, or geopolitical events triggering safe-haven flows.

Long-term holding (over 3 months): bottom-fishing and timing

Investors optimistic about the AUD’s long-term prospects can gradually build positions at current lows, smoothing out market volatility over time. Once a bullish trend is confirmed, incremental additions are advisable. The core idea: believe in Australia’s long-term economic resilience and China’s eventual recovery, while accepting short-term uncertainties.

Practical advice and risk warnings for AUD trend forecasts

The key conclusion is: AUD/USD is at a technical and fundamental crossroads. In the short term, range trading (0.6370–0.6450) is recommended, with trend-following once breakout occurs. The medium- to long-term direction depends on signals from the Fed’s policy shifts and whether global trade risks ease.

For investors, forex volatility offers trading opportunities. Margin trading allows both long and short positions, with leverage from 1 to 200 times, attractive to small and medium investors. But it’s crucial to remember: forex trading is high risk, and investors may lose all capital.

Ultimately, AUD trend forecasts depend on multiple interacting factors. If data this week reinforces rate cut expectations, consider long positions; if not, beware of dollar rebound pressures. Traders should closely monitor market sentiment before and after data releases, adjust strategies flexibly, and strictly follow risk management rules, including setting reasonable stop-loss levels and avoiding excessive leverage.