The Australian Dollar is expected to finish the week positively against the US Dollar, noting a 0.21% increase as improved risk appetite keeps the AUD/USD around 0.7124, closing close to Friday’s peak.
AUD/USD Price Forecast: Technical Outlook
After surpassing the June 15 high of 0.7088, which became support after it was breached, the AUD/USD rose above 0.7100, reaching a two-day high of 0.7136 before stabilizing around 0.7120.
The Relative Strength Index (RSI) indicates a bearish sentiment, but a shift towards bullishness seems imminent. This leads buyers to anticipate more upward movement, especially with expectations of a rate increase by the Reserve Bank of Australia at their September 29 meeting.
If the AUD/USD surpasses this week’s high of 0.7168, it could potentially reach 0.7200. Strength beyond that could push it to the September 9 daily high of 0.7237, and then further to the cycle high of 0.7277 from May 6.
Conversely, if the AUD/USD dips below the 50-day simple moving average (SMA) of 0.7084, the next support could be the 100-day SMA at 0.7078. Below that is the September 16 swing low of 0.7075, before confronting the 200-day SMA at 0.7012.
AUD/USD Price Chart – Daily
Australian Dollar FAQs
A critical factor for the Australian Dollar (AUD) is the interest rates set by the Reserve Bank of Australia (RBA). Given Australia’s resource-rich status, another significant influencer is the price of its major export, Iron Ore. The condition of the Chinese economy, Australia’s leading trading partner, along with inflation rates and trade balances, also plays a role. Market sentiment—whether investors are leaning towards riskier assets or seeking safer options—affects the AUD as well, with a risk-on environment being favorable for it.
The RBA impacts the AUD by determining the lending rates among Australian banks, influencing overall interest rates in the economy. The RBA aims to maintain a stable inflation rate between 2-3% by adjusting these rates. Higher rates compared to other major central banks generally support the AUD, while lower rates have the opposite effect. Moreover, the RBA can employ quantitative easing and tightening to affect credit conditions, with easing typically having a negative impact on the AUD and tightening providing support.
China, being Australia’s largest trading partner, significantly impacts the value of the AUD. A robust Chinese economy often leads to increased demand for Australian exports, thereby raising the AUD’s value. Conversely, slower growth in China can negatively affect the currency. As a result, unexpected shifts in Chinese economic data frequently have a direct correlation with fluctuations in the AUD.
Iron Ore is Australia’s primary export, generating around $118 billion annually as of 2021, with China being the key recipient. Therefore, fluctuations in Iron Ore prices are closely linked to the AUD’s value. Generally, an increase in Iron Ore prices tends to elevate the AUD due to heightened demand, whereas a decrease can lead to a decline in value. Additionally, higher prices for Iron Ore can contribute to a more favorable trade balance for Australia, positively impacting the AUD.
The Trade Balance, which represents the difference between a country’s export earnings and its import expenses, also influences the AUD. If Australia produces desirable exports, its currency may strengthen because of the demand created by foreign purchasers. A favorable Trade Balance generally enhances the AUD, while a negative balance can weaken it.
