The Australian dollar saw an increase on Friday as disappointing US retail sales stirred concerns about the economy, leading to speculation that the Federal Reserve would hold off on raising interest rates. The AUD/USD pair gained 0.34%, reaching 0.7083.
AUD/USD Price Forecast: Technical Outlook
Despite showing some strength on the daily chart, AUD/USD has struggled to break past the January 29 high of 0.7094 definitively, which might pave the way for further gains. Since mid-July, momentum has shifted to a bullish trend, as reflected in the Relative Strength Index (RSI).
From a structural standpoint, the pair will only be considered bullish if it surpasses the June 1st high of 0.7190. Initially, resistance for AUD/USD sits at 0.7100, with the next level following close behind. If growth continues, the following target would be 0.7200.
On the flip side, the first support level is at the 100-day simple moving average (SMA) of 0.7058. If this level fails, the next demand area appears at the 50-day SMA of 0.6991, and then at the 200-day SMA around 0.6937.
AUD/USD Price Chart – Daily
Australian Dollar Frequently Asked Questions
A key factor influencing the Australian dollar (AUD) is the interest rate set by the Reserve Bank of Australia (RBA). Given Australia’s resource-rich landscape, the price of its top export, iron ore, also plays a significant role. Other contributors include Australia’s inflation rates, growth statistics, trade balance, and the overall health of the Chinese economy, which is its largest trading partner. Market sentiment, whether investors are leaning towards risk or safety, further impacts the currency with a risk-on approach typically benefiting the AUD.
The RBA drives the value of the Australian dollar (AUD) by determining interbank interest rates, which influences borrowing costs across the economy. Their primary aim is to maintain stable inflation around 2-3% through interest rate adjustments. The AUD tends to perform well when interest rates are relatively high compared to other major central banks, and vice versa. Additionally, the RBA can engage in quantitative easing or monetary tightening to shape credit conditions, where the former can negatively impact the AUD and the latter can provide support.
As Australia’s largest trading partner, China’s economic performance significantly influences the value of the Australian dollar (AUD). A robust Chinese economy leads to increased demand for raw materials and goods from Australia, resulting in a higher AUD. Conversely, if China’s growth slows down, the AUD typically feels the effects. Thus, fluctuations in China’s economic data often have a direct impact on the Australian dollar and its related pairs.
Iron ore stands as Australia’s most significant export, valued at roughly $118 billion annually, with China as the primary market. As such, changes in iron ore prices can heavily influence the Australian dollar. Generally, an increase in iron ore prices boosts demand for the currency, whereas a decline causes it to drop. Rising iron ore prices typically enhance the chances of a positive trade balance for Australia, which is also favorable for the AUD.
The trade balance, which reflects the difference between a country’s export earnings and its import expenses, is another crucial aspect affecting the value of the Australian dollar. When Australia can produce high-demand exports, the resulting foreign buyer interest can appreciate the currency. Therefore, a favorable net trade balance results in a stronger Australian dollar, while a negative balance has the opposite effect.
