The Australian dollar remains under pressure. Can it rebound? A comprehensive analysis of the future trend of the AUD.

The Australian dollar (AUD) is the fifth most traded currency globally (ranking: USD, EUR, JPY, GBP, AUD), and the AUD/USD currency pair is also one of the top five most actively traded pairs worldwide. This currency pair offers the advantages of high liquidity and low spreads, enabling traders to execute short-term trades or medium- to long-term strategies more flexibly.

📌 Key Features: AUD is a “Commodity Currency”. Australia’s economic structure heavily depends on exports of bulk commodities such as iron ore, coal, and copper. Therefore, every fluctuation in global raw material prices directly impacts the volatility of the AUD exchange rate.

The AUD itself is a high-yield currency and has historically been a target for hot money and carry trades. However, over the past decade, the AUD has generally weakened. From an early 2013 level of 1.05, the AUD/USD has depreciated by over 35% by 2023, while the US dollar index increased by 28.35% during the same period. Other major currencies like the euro, Japanese yen, and Canadian dollar also depreciated against the dollar, reflecting a dominant strong dollar cycle over the past ten years.

Why has the AUD remained weak?

From both fundamental and technical perspectives, the AUD faces relatively unfavorable conditions. Even during rebounds, it struggles to stabilize at high levels.

In Q4 2024, the AUD/USD exchange rate plummeted, with an annual decline of about 9.2%. Entering 2025, amid rising global trade tensions and recession fears, the AUD briefly fell to 0.5933, hitting a five-year low.

The core pressures come from three aspects:

First, escalating US tariffs impact global trade, putting downward pressure on Australia’s exports of metals, energy, and other raw materials, directly undermining the fundamentals of the commodity currency. Second, the interest rate differential between the US and Australia remains difficult to reverse; Australia’s domestic economic growth is sluggish, reducing the attractiveness of Australian assets to international capital, leading to significant capital outflows. Additionally, the Reserve Bank of Australia (RBA) maintains a cautious policy stance, further weakening demand for the AUD.

When can the AUD rebound? Key factors to watch

After the impact of Trump’s “reciprocal tariffs” policy in early 2025, the AUD/USD gradually appreciated. Particularly from September, iron ore and gold prices surged, coupled with market expectations of a Federal Reserve rate cut, increasing the appeal of risk assets, and the AUD rallied sharply. On September 10, the AUD/USD briefly rose to 0.6636, surpassing the high since November 2024. Although it retreated slightly over the past two months, it has remained above 0.64.

The potential for further AUD rebound depends on these three key factors:

(1) Australia’s economic conditions and the RBA’s stance

In Q3 2025, Australia’s Consumer Price Index (CPI) rose by 1.3% month-over-month, significantly higher than the previous quarter’s 0.7% and exceeding market expectations. The RBA has recently emphasized that core inflation pressures in housing construction and services are more persistent than anticipated, explicitly stating that further policy easing will only be considered once inflation enters a sustainable downward trajectory.

This reduces the likelihood of a rate cut in November. The diminished expectation of easing can, in the short term, support the AUD, making it more attractive compared to currencies that are easing or expanding easing measures (like the USD).

(2) The US dollar’s strength or weakness

After the Federal Reserve announced a 25 basis point rate cut on October 30, Chairman Powell’s comments cooled market expectations for additional rate cuts in December. Despite discussions about dollar depreciation and de-dollarization, the US dollar index (DXY) has shown resilience since bottoming near 96 in summer, rebounding about 3%, with the possibility of breaking above the psychological 100 level increasing. Typically, a stronger dollar correlates with a weaker AUD, as they tend to move inversely.

(3) China’s economic recovery

Australia’s economic structure is highly dependent on resource exports, with China being its largest buyer. The health of China’s economy directly influences demand for Australian iron ore, coal, natural gas, and other key raw materials, which are central to the AUD’s movement. When China shows strong recovery, resource exports and prices tend to rise significantly, boosting market confidence in the AUD. Conversely, if China’s recovery slows or the property market remains subdued, long-term demand for raw materials may weaken, undermining the AUD’s support.

How do financial institutions view the AUD outlook?

Major institutions have differing views on the AUD’s future:

Morgan Stanley projects the AUD/USD could rise to 0.72 by the end of 2025, supported by the RBA’s potential hawkish stance and rising commodity prices.

UBS remains more cautious, believing that despite resilience in Australia’s economy, global trade uncertainties and potential Fed policy shifts could limit AUD gains, expecting the exchange rate to stay around 0.68 by year-end.

The Commonwealth Bank of Australia’s economists offer a more conservative forecast, suggesting the AUD’s recovery may be short-lived, with a peak around March 2026, and possibly retreating again by the end of 2026. They acknowledge that while the dollar may weaken in 2025, the US economy’s outperformance could lead to a resumption of dollar strength later.

Major currency pair analysis

AUD/USD: Increased short-term volatility, key levels to watch

The RBA maintained interest rates at 3.6% in November and issued cautious signals, emphasizing that inflation remains above target. Currently, the AUD/USD hovers around 0.65.

Factors influencing the pair:

⭐️ Policy divergence: The RBA’s unexpected pause on rate cuts indicates a cautious approach to inflation control, providing short-term support for the AUD, but future policy directions remain uncertain. The Fed’s moves will continue to influence USD trends.

⭐️ Inflation and growth: Australia’s inflation has eased and approached the target range, laying the groundwork for potential policy easing. However, if GDP growth remains weak, expectations of rate cuts will increase.

⭐️ Trade and geopolitical risks: US tariffs and geopolitical tensions keep risk premium elevated. As a commodity currency, the AUD’s performance is closely tied to commodity prices. Rising prices will support the AUD.

Short-term outlook: Expect fluctuations between 0.63 and 0.66. If inflation data remains favorable and the economy stabilizes, the pair may test resistance above 0.66; if global risks intensify or the dollar rebounds, the AUD could fall back to 0.63 or lower.

AUD/CNY: Follows AUD/USD, influenced by RMB policies

Trade stability between China and Australia significantly impacts this pair. The RMB’s movement is heavily influenced by Chinese central bank policies and US-China relations.

AUD/USD generally tracks the AUD/CNY, but due to lower volatility in RMB, declines may be slightly smaller than in AUD/USD. The AUD’s performance also depends on domestic economic conditions and RBA policies.

Short-term outlook: Over the next 1-3 months, with RMB relatively stable, AUD/CNY is expected to fluctuate between 4.6 and 4.75. If the RMB weakens due to domestic or external factors, AUD/CNY could briefly rise toward 4.8.

AUD/MYR: Regional economic differences determine direction

Malaysia’s economy relies on exports and raw materials, making the ringgit sensitive to commodity prices. If global demand remains stable, the ringgit may strengthen. Weakness in Australia’s economy could limit AUD’s rebound.

The Bank of Malaysia’s policies are relatively stable and may remain steady or tighten. If the policy interest rate differential widens, the ringgit could strengthen. A slowdown in RBA rate cuts will reduce downward pressure on the AUD.

Short-term outlook: Amid global economic uncertainties, AUD/MYR is expected to fluctuate between 3.0 and 3.15. If Australian economic data weakens further, it may test support near 3.0.

Trading strategy guidelines for AUD

Short-term (1-3 days): Cautiously bullish, watch for technical breakouts

Long entry conditions: Price breaks above 0.6450 resistance. If AUD/USD stabilizes above 0.6450, consider a small long position targeting the 200-day moving average at 0.6464, and further toward the psychological 0.6500 level. Triggers include weaker-than-expected US data (implying higher chances of rate cuts) or better-than-expected Australian CPI. Stop-loss at 0.6420.

Short entry conditions: Price falls below 0.6373 support. If it breaks below the 10-day EMA at 0.6373, consider short positions targeting 0.6336 (recent low) or even 0.6300. Triggers include strong US data or a significant cooling of Australian CPI. Stop-loss at 0.6400.

Wait-and-see: Before US GDP, core PCE, and Australian CPI releases, market volatility may increase. Reduce position size or stay on the sidelines.

Medium-term (1-3 weeks): Trend-following, monitor policy shifts

Bullish scenario: Weak US employment data, declining inflation, combined with easing trade tensions, could boost risk sentiment and push the AUD toward 0.6550-0.6600. A break above the 200-day moving average (0.6464) would confirm a medium-term reversal, prompting additional long entries. Risks include rising Australian inflation forcing RBA to turn hawkish, unexpected dollar weakness, or geopolitical events.

Bearish scenario: Strong US GDP and non-farm data, delaying Fed rate cuts, could strengthen the dollar, pushing the AUD down toward 0.6250 (yearly lows). Escalating trade tensions, poor Australian trade data, or weak Chinese economic data would also heighten downside risks.

Long-term holding strategy

If bullish on the AUD long-term, consider scaling into positions during current lows, smoothing entry over time, especially after confirming an uptrend.

Overall investment advice

Currently, AUD/USD is in a phase of technical consolidation amid fundamental debates. Short-term trading should focus on range-bound strategies (0.6370-0.6450), with breakouts following the trend. The medium- to long-term direction depends on Fed policy shifts and global trade risk developments.

If data this week reinforces expectations of rate cuts, consider building long positions; otherwise, remain cautious of dollar rebound risks. Traders should closely monitor market sentiment around data releases and adjust strategies flexibly.

Risk warning: The AUD can be highly volatile; forex trading involves high risk. Investors should fully understand the risks involved, conduct thorough market analysis, and employ proper risk management. All investment decisions should be based on comprehensive market research.