Why does the Australian dollar continue to stay under pressure? Is there still a rebound opportunity in the future? An in-depth analysis of AUD trend forecasts

Why Is AUD Investment Gaining So Much Attention?

The Australian dollar is the fifth most traded major currency globally (after the USD, EUR, JPY, and GBP), and the AUD/USD currency pair ranks among the top five most active trading pairs worldwide. This means investors can enjoy ample liquidity and very tight spreads, enabling effective execution of both short-term trades and long-term positions.

It is worth noting that the AUD is a typical commodity currency. Australia’s economy is highly dependent on exports of primary products such as iron ore, coal, and copper. Any fluctuations in global raw material prices are vividly reflected in the AUD exchange rate. Additionally, due to its high-yield nature, the AUD is often favored for arbitrage trading and hot money flows.

Why Has the AUD Been Weak for Many Years? Over 35% Depreciation in a Decade

Although the AUD was once highly favored, its performance over the past decade has been disappointing. Starting from around 1.05 in early 2013, by the end of 2023, the AUD/USD has depreciated by over 35%. During the same period, the US dollar index (DXY) rose by 28.35%. The euro, Japanese yen, and Canadian dollar also generally weakened against the USD, reflecting a global shift into a prolonged strong dollar cycle.

From both technical and fundamental perspectives, the AUD remains relatively weak. Even during rebounds, it struggles to hold gains at higher levels.

In Q4 2024, the AUD/USD declined approximately 9.2%. Entering 2025, amid rising global trade tensions and recession fears, the AUD briefly dropped to 0.5933, hitting a five-year low. Analysts point out that US tariffs are suppressing global trade, hindering raw material exports. Coupled with the reversal of the Australia-US interest rate differential and weak domestic economic performance, capital is flowing out of Australia.

AUD Outlook: Is the Rebound Sustainable?

Despite experiencing a decline in the first half of the year due to Trump’s tariff disputes, the AUD began a gradual recovery after April. In September, supported by soaring iron ore and gold prices and expectations of Fed rate cuts, the AUD/USD rose to 0.6636, surpassing the November 2024 high. Although there has been some correction in the past two months, it has remained above 0.64.

Three core factors influencing AUD forecasts:

1. RBA Policy and Domestic Economy

In Q3 2025, Australia’s Consumer Price Index (CPI) rose by 1.3% month-over-month, exceeding the previous quarter’s 0.7% and far surpassing market expectations. The RBA has repeatedly emphasized that inflation pressures in housing construction and services sectors are difficult to ease quickly. The central bank has clearly stated that only when inflation enters a sustainable downward trajectory will further easing be considered. This has significantly lowered market expectations for a rate cut in November.

In the short term, the reduced expectations for easing can support the AUD, making it more attractive compared to other currencies that are about to start easing.

2. US Dollar Strength and Weakness Drive AUD Movements

At the end of October, the Fed announced a second 25 basis point rate cut to a 3.75%-4.00% range and decided to end balance sheet reduction starting December. However, subsequent comments from Chair Powell dampened market enthusiasm for further rate cuts in December.

Despite ongoing discussions about dollar depreciation and de-dollarization, the US dollar index (DXY) has shown unexpected resilience since hitting a low of 96 this summer, rebounding about 3%. The probability of breaking above the 100 psychological level is increasing. Generally, a stronger dollar tends to weaken the AUD, as they tend to move inversely.

3. China’s Economic Performance Directly Affects the AUD Fundamentals

Australia’s economy is highly resource-export dependent, with China being its largest trading partner. China’s demand for key raw materials like iron ore, coal, and natural gas directly influences the AUD’s strength.

When China’s economy is vibrant, resource exports and prices rise simultaneously, boosting the attractiveness of Australian assets. Conversely, if China’s economy slows and the property market remains sluggish, raw material demand prospects weaken, and the AUD loses key support.

Diverging Views on AUD Outlook from Major Institutions

Different financial institutions have varying outlooks for the AUD.

Morgan Stanley is relatively optimistic, expecting the AUD/USD to reach 0.72 by the end of 2025, supported by the RBA’s hawkish stance and commodity prices.

UBS is more cautious, believing that global trade uncertainties and Fed policy changes could still hinder the AUD’s rise, with a forecast around 0.68 by year-end.

The Commonwealth Bank of Australia’s economists are the most pessimistic, predicting a brief recovery for the AUD with a peak possibly in March 2026, followed by another decline. Although the USD may weaken temporarily in 2025, as the US economy surpasses other major economies, the dollar is expected to regain strength.

Technical Analysis and Trading Opportunities for AUD

Recent Range: The AUD/USD currently fluctuates between 0.63 and 0.66. If inflation continues to ease and the economy remains stable, it may test resistance above 0.66; if risk appetite deteriorates or the dollar rebounds, it could fall back toward 0.63 or lower.

Short-term Trading Strategy: Focus on range trading within 0.6370-0.6450. A break above 0.6450 could signal a long entry targeting 0.6500; a break below 0.6373 could suggest a short position aiming for 0.6300.

Medium-term Outlook: Trend-following is the main approach. If Fed rate cut expectations increase and trade tensions ease, the AUD could advance toward 0.6550-0.6600. Conversely, if US economic resilience exceeds expectations and the Fed delays easing, the AUD may test lows for the year.

Long-term Positioning: Bullish investors can accumulate positions gradually at current lows, using time to expand their space, and add on confirmation of trend direction.

AUD Against Other Currencies: Forecasts

AUD/CNY: Influenced by China-Australia trade policies and the RMB exchange rate. Over the next 1-3 months, expect fluctuations between 4.6 and 4.75. If the RMB weakens due to economic pressures, AUD/CNY could rise toward 4.8.

AUD/MYR: Depends on regional economic differences and monetary policy contrasts. In uncertain global conditions, expect trading within 3.0-3.15. If Australian economic data deteriorates, it may test support at 3.0.

Investment Advice and Risk Warning

The AUD may experience increased short-term volatility. Key monitoring points include CPI data, RBA meeting signals, global trade developments, and commodity prices. If global risks ease and inflation softens, the AUD could gradually strengthen; otherwise, caution is advised.

Investors should note that forex trading involves high risk, and AUD exchange rates can be highly volatile. Participants need to fully understand market mechanisms and adjust strategies dynamically based on multiple information sources. Before making any investment decisions, consulting professional advice is recommended.