What is the future trend of the Australian dollar? Complete analysis of exchange rate forecasts and investment opportunities

Why Has the Australian Dollar Been Under Continuous Pressure in Recent Years?

As the fifth-largest trading currency globally, the AUD is characterized by strong liquidity and active trading. However, over the past decade, this once-favored high-yield currency has shown weak performance. Since early 2013 at around 1.05, the AUD/USD has depreciated by over 35%, while the US dollar index has risen by 28.35% in the same period. This reflects a global strong dollar cycle, with currencies like the euro, yen, and Canadian dollar facing similar challenges.

Australia’s economy is highly dependent on exports of commodities such as iron ore, coal, and copper, making the AUD a typical “commodity currency.” Any fluctuations in raw material prices can cause sharp swings in the exchange rate. Entering Q4 2024, the AUD/USD plummeted sharply, with an annual decline of about 9.2%. By early 2025, amid escalating global trade tensions, the AUD once dipped to 0.5933, hitting a five-year low.

Analysts point out that the main pressures come from three aspects: the impact of US tariff policies on global trade, the decline in raw material exports weakening the commodity currency status, and the difficulty in reversing the Australia-US interest rate differential. Coupled with slowing domestic economic growth and ongoing capital outflows, the attractiveness of Australian assets has significantly diminished.

AUD Exchange Rate Forecast: Rebound or Continued Weakness?

Since September 2025, the AUD has experienced a rebound. Iron ore and gold prices surged, expectations of Fed rate cuts increased, and risk assets regained favor. The AUD/USD briefly rose to 0.6636, reaching a new high since November 2024. Although there has been some pullback in recent two months, it has remained above 0.64.

Three key factors influencing the AUD exchange rate:

First, RBA Policy and Economic Conditions

The Reserve Bank of Australia (RBA) maintained interest rates at 3.6% in November. The Q3 Consumer Price Index rose 1.3% month-over-month, exceeding market expectations. The central bank emphasized that inflationary pressures in housing and services sectors still require time to digest. Until inflation enters a sustainable downward trajectory, policy easing is unlikely. This means limited room for rate cuts, providing some short-term support for the AUD.

Second, Strength of the US Dollar

In October, the Fed lowered the federal funds rate by 25 basis points to a range of 3.75%-4.00%, marking the second rate cut this year. However, signals from Powell suggest the probability of further rate cuts in December has diminished. The US dollar index rebounded about 3% from summer lows near 96, with the possibility of breaking above the psychological 100 level increasing. A stronger dollar generally correlates with a weaker AUD, showing an inverse relationship.

Third, China’s Economic Recovery

China is the largest buyer of key raw materials like iron ore, coal, and natural gas in Australia’s export structure. The strength or weakness of China’s economy directly influences demand for these commodities. A robust recovery would boost resource exports and prices, supporting the AUD. Conversely, persistent weakness in China’s property market could undermine long-term demand confidence.

AUD Forecast Analysis: Diverging Views Among Institutions

Financial institutions hold differing opinions on the AUD’s future. Morgan Stanley is more optimistic, expecting the AUD/USD to rise to 0.72 by the end of 2025, mainly supported by the RBA’s potential hawkish stance and commodity prices.

UBS is more cautious, believing that despite resilience in Australia’s economy, global trade uncertainties and potential changes in Fed policy will limit AUD gains, projecting a year-end rate around 0.68.

The Commonwealth Bank economists warn of short-lived rebounds, predicting the AUD will peak around March 2026 before possibly declining again, as the US economy outpaces other major economies, potentially strengthening the dollar anew.

Technical Outlook and Trading Recommendations for AUD/USD

Short-term (1-3 days)

The AUD/USD currently fluctuates between 0.64 and 0.65. Key resistance at 0.6450, support at 0.6373. If it stabilizes above 0.6450, it could target the 200-day moving average at 0.6464 and the psychological 0.6500 level. Failure to break through may lead to testing 0.6336 or even 0.6300.

Upcoming market-moving data include US GDP, Non-Farm Payrolls, Core PCE, and Australian CPI. It is advisable to reduce positions before data releases to manage volatility.

Medium-term (1-3 weeks)

If US economic data weaken, inflation continues to decline, and trade tensions ease, the AUD could benefit from improved risk sentiment, targeting 0.6550-0.6600. Confirmed break above the 200-day moving average could be a signal to add positions.

Conversely, if US economic resilience persists, Non-Farm Payrolls remain strong, and the Fed delays rate cuts, the AUD may test support near 0.6250. Risks include rising Australian inflation forcing a hawkish shift, escalating trade disputes, or geopolitical events.

Long-term Holding Advice

For those optimistic about the AUD’s long-term prospects, consider building positions gradually at current lows, smoothing out market fluctuations over time. Further accumulation should be based on confirmation of an uptrend.

Other Currency Pair Forecasts for AUD

AUD/CNY

In the short term, considering the relatively stable RMB, AUD/CNY may fluctuate between 4.6 and 4.75. If China’s economy weakens further, the AUD could rise toward 4.8. Key variables include trade stability and RMB policy direction.

AUD/MYR

Australia’s economic weakness may limit the AUD’s rebound potential. If economic data deteriorates further, AUD/MYR could test support near 3.0, with a range expected between 3.0 and 3.15.

Investment Risk Warning

The AUD exchange rate is highly volatile. Investors should monitor CPI, economic data, RBA meetings, global trade, and commodity prices. Short-term trading should focus on ranges, with breakouts managed carefully.

Foreign exchange investments involve risks, including the potential loss of all invested capital. Investors are advised to approach short-term fluctuations cautiously, incorporate multiple market signals, and adjust positions dynamically. If data this week reinforce rate cut expectations, consider modest long positions; otherwise, remain alert to dollar rebound risks. Always understand the risks thoroughly and set clear stop-loss levels before trading.