AUD trend analysis: From a five-year low to a critical rebound period, is there still room for growth?

The Identity of the Australian Dollar

As the fifth-largest traded currency globally (ranking: USD, EUR, JPY, GBP, AUD), the AUD/USD currency pair holds an important position in the global foreign exchange market. This currency pair is characterized by high liquidity and relatively tight spreads, enabling both short-term traders and medium- to long-term holders to operate efficiently.

However, the AUD has a special identity—it is a typical “commodity currency.” Australia’s economy is highly dependent on exports of raw materials such as iron ore, coal, and copper. When global commodity prices fluctuate, the AUD exchange rate reacts sharply. Additionally, as a high-yield currency, the AUD has long been a target for carry trades and hot money chasing higher returns.

A Decade of Weakness: Why Is the AUD Growing Weaker?

Although the AUD was once a favorite among investors, its performance over the past decade has been disappointing. Using early 2013 at 1.05 as a baseline, the AUD has depreciated over 35% against the USD over ten years, while the US Dollar Index (DXY) has risen by 28.35% during the same period. Major currencies like the euro, yen, and Canadian dollar have also depreciated against the dollar—reflecting a broad-based strong dollar cycle dominating the market.

The AUD faces a dual dilemma: both technically and fundamentally, it remains at a disadvantage. Even when it rebounds, it struggles to sustain high levels.

The situation in Q4 2024 is even more severe. The AUD/USD plunged rapidly, with an annual decline of about 9.2%. Entering 2025, with escalating global trade tensions and recession fears, the AUD once fell to 0.5933, hitting a five-year low. Analysts point out that US tariffs suppress global trade, raw material exports decline, the US-Australia interest rate differential remains difficult to reverse, and Australia’s domestic economy remains sluggish—all leading to continuous capital outflows from Australian assets.

Signs of a Rebound: When Will the AUD Regain Its Vitality?

However, the situation is gradually changing. After the Trump tariff panic in April 2025, the AUD/USD began a slow appreciation. By September, iron ore and gold prices surged, the Federal Reserve’s rate cut expectations intensified, and investor risk appetite improved. The AUD experienced a rapid rally, reaching a high of 0.6636, breaking above the high since November 2024. Although there was some pullback in the past two months, it has remained above 0.64.

Whether the AUD can “rise back” depends critically on three major factors:

First, Australia’s Economy and Central Bank Stance

In Q3 2025, Australia’s CPI rose by 1.3% month-over-month, surpassing the previous 0.7% and exceeding market expectations. The Reserve Bank of Australia (RBA) repeatedly emphasized that core inflation in housing construction and services is difficult to cool quickly, and policy easing will only be considered once inflation enters a sustainable downward trajectory. This significantly reduces the probability of a rate cut in November, and market expectations for further easing are weakening.

In the short term, diminished easing expectations will support the AUD, making it more attractive compared to currencies that are about to cut rates (like the USD).

Second, the Key Turning Point of the US Dollar’s Strength

In October, the Federal Reserve lowered the federal funds rate by 25 basis points to 3.75%-4.00%, marking the second rate cut of the year. However, Chair Powell’s subsequent comments dampened market enthusiasm, and expectations for a further rate cut in December were dashed. The US Dollar Index, after bottoming near 96 in summer, has shown resilience beyond expectations, rebounding about 3%, with increasing chances of breaking the 100 psychological level. Generally, when the dollar strengthens, the AUD tends to weaken, as they often move inversely.

Third, the Economic Outlook of China

Australia’s economic structure is highly resource-export dependent, with China being its largest trading partner. China’s demand for Australian iron ore, coal, natural gas, and other raw materials directly influences the AUD’s movement. When China’s economy is strong, resource exports increase in volume and price, providing solid support for the AUD; conversely, if China’s recovery slows or the property market remains sluggish, market concerns about long-term demand will weigh on the AUD, causing it to weaken.

How Do Financial Institutions View the AUD Exchange Rate?

Major institutions have differing outlooks on the AUD’s future.

Morgan Stanley is relatively optimistic, expecting the AUD/USD to rise to 0.72 by year-end, citing the potential for the RBA to maintain a hawkish stance and commodity prices to strengthen.

UBS is more cautious, believing that despite Australia’s resilience, global trade uncertainties and changes in Fed policy may limit the upside, projecting a year-end level around 0.68.

CBA economists recently issued a cautious signal, suggesting the AUD’s recovery may be short-lived, with a peak around March 2026, and possibly retreating again by year-end. As the US economy outpaces other major economies, the dollar may regain strength.

Short-term Forecasts for Major Currency Pairs Involving the AUD

AUD/USD

Currently, the AUD/USD hovers around 0.65. The RBA’s decision in November to keep rates at 3.6% and its cautious tone, along with inflation data remaining above expectations, influence the outlook. Key factors include:

• Policy divergence and market expectations adjustment—RBA’s decision not to cut rates indicates cautiousness on inflation control, supporting the AUD in the short term, but future policy divergence remains. The Fed’s actions will continue to influence the dollar, and a strong dollar will limit AUD gains.

• Inflation and economic data—Australia’s inflation has eased and approached the target range, laying the groundwork for policy easing. However, slowing GDP growth and high global economic uncertainty mean weak data could reignite rate cut expectations.

• International trade and geopolitical risks—US tariffs and geopolitical tensions remain high. As a commodity currency, the AUD’s movement is closely tied to commodity prices, which, if rising, could lift the AUD.

Short-term forecast: The AUD/USD is expected to fluctuate between 0.63 and 0.66. If inflation data remains positive and the economy stays stable, it may test resistance above 0.66. Conversely, worsening global risk sentiment or a stronger dollar could push it down to 0.63 or lower.

AUD/CNY

The AUD/USD and AUD/CNY tend to move closely, but since the RMB is less volatile, the AUD/CNY usually sees smaller declines. Stable China-Australia trade relations support the AUD/CNY. The RMB’s movement is heavily influenced by Chinese monetary policy and US-China relations. Weak Chinese economic data may ease RMB depreciation pressures.

Short-term forecast: Over the next 1-3 months, AUD/CNY may range between 4.6 and 4.75. If the RMB weakens due to domestic economic pressures or external factors, AUD/CNY could briefly rise toward 4.8.

AUD/MYR

Malaysia’s economy relies on exports and raw materials, making the MYR sensitive to commodity prices. Australian economic weakness may limit AUD’s rebound potential. If Bank Negara Malaysia maintains or tightens policies, the interest rate differential could strengthen the MYR.

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

Trading Strategies for Different Timeframes

Short-term (1-3 days)

• Long entry: 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. Triggers include US GDP or non-farm payrolls weaker than expected (implying higher chance of rate cuts), or Australian CPI unexpectedly rising. Stop-loss at 0.6420.

• Short entry: 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 inflation. Stop-loss at 0.6400.

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

Medium-term (1-3 weeks)

• Bullish scenario: If Fed rate cuts intensify (due to soft employment, falling inflation, easing trade tensions), the AUD could benefit from risk sentiment, targeting 0.6550-0.6600. A break above the 200-day moving average would confirm a medium-term reversal. Risks include a resurgence of Australian inflation, unexpected dollar weakness, or geopolitical shocks.

• Bearish scenario: If US economic resilience (strong GDP and non-farm data) delays rate cuts, the dollar could rebound, pushing the AUD down toward 0.6250 (yearly low). Escalating trade tensions, weak Australian trade data, or sluggish Chinese data could also deepen declines.

• Long-term holding: For those bullish on the AUD long-term, consider accumulating on dips, especially after confirming an uptrend, to smooth out market volatility.

Investment Advice and Risk Warning

Currently, the AUD/USD is in a critical phase of technical consolidation and fundamental debate. Short-term trading should focus on range-bound strategies (0.6370-0.6450), with breakout follow-up. The medium- to long-term direction depends on signals from Fed policy shifts and global trade risk developments.

Traders should pay attention to:

1. The high volatility of the AUD, with frequent cyclical opportunities—closely monitor market sentiment before and after data releases.
2. If data strengthens expectations for rate cuts this week, consider long positions; otherwise, beware of dollar rebound risks.
3. In the medium to long term, the AUD’s trajectory ultimately hinges on the pace of China’s economic recovery, the sustainability of dollar strength, and the overall trend in global commodity prices.

All investments carry risks. Forex trading is a high-risk activity. Investors should carefully assess their risk tolerance, develop proper position management, and set stop-loss orders accordingly.