## Why Is the Australian Dollar's Trend Difficult to Reversal? Why Do High-Liquidity Commodity Currencies Remain Weak

As one of the top five major currencies by global trading volume, the AUD/USD is also one of the most active currency pairs. However, over the past decade, the AUD trend has been opposite—starting from 1.05 in early 2013, the Australian dollar has depreciated by over 35% by 2023. During the same period, the US Dollar Index (DXY) rose by 28.35%, forming a typical strong dollar cycle.

What signals are hidden behind this situation? As a high-yield currency, the AUD should theoretically be attractive, but the actual trend shows that relying solely on interest rate differentials is no longer enough to support the AUD. Although the AUD/USD has appreciated about 5 to 7% overall in 2025, reaching as high as 0.6636, this rebound ultimately cannot change its structural weakness.

## The Triple Dilemmas of the AUD Trend: Why a Rise in Commodity Prices Still Fails to Save the Market

The continued weakness of the AUD is mainly due to three simultaneous pressures:

**First, the outlook for commodity demand is uncertain.** Australia's export structure heavily depends on iron ore, coal, and energy, making the AUD essentially a commodity currency. If China's economy remains weak, even a short-term rebound in commodities will likely lead to a quick spike and fall in the AUD. Current global trade uncertainties directly impact Australia's exports.

**Second, the narrowing interest rate advantage.** The Reserve Bank of Australia (RBA) currently has a cash rate of about 3.60%, with market expectations of possibly raising it again to 3.85% in 2026. However, if inflation becomes less sticky or the employment market weakens, the RBA's hawkish stance will be hard to sustain, reducing the attractiveness of the AUD interest rate differential.

**Third, the structural strength of the US dollar remains unbroken.** The interest rate differential between the US and Australia is difficult to reverse, and US tariffs impact global trade, making Australia's domestic economy relatively less attractive. When risk aversion rises, capital tends to flow into the dollar, putting pressure on the AUD.

## Three Key Factors That Determine the AUD Trend

Investors aiming to forecast the medium- to long-term direction of the AUD/USD need to focus on the following factors:

**RBA interest rate policy and interest rate differential reconstruction.** If Australia's inflation remains sticky and the employment market stays resilient, maintaining a hawkish stance will help rebuild the AUD's interest rate advantage; otherwise, if rate hikes fall short, the AUD's support will weaken significantly.

**China's economy and commodity performance.** As a commodity currency, the AUD's movement is highly correlated with China's infrastructure and manufacturing activity. When Chinese demand recovers, iron ore prices tend to strengthen simultaneously, and the AUD quickly reflects this in the exchange rate; if China's recovery is insufficient, the upside potential for the AUD is limited.

**US dollar trend and global risk sentiment.** The Federal Reserve's policy cycle remains central to the global forex market. In a rate-cut environment, a weaker dollar usually benefits risk currencies like the AUD; however, when risk aversion increases and capital flows back into the dollar, the AUD can weaken even if its fundamentals are not deteriorating.

**In summary**, for the AUD to break out of a true medium- to long-term bull trend, three conditions must be met simultaneously: the RBA re-establishes a hawkish stance, China's demand substantively improves, and the US dollar enters a structural weakening phase. If only one of these is present, the AUD is more likely to remain in a range-bound oscillation.

## Forecast of the AUD's Trend in 2026 and Beyond

Market opinions on the AUD's future diverge. Morgan Stanley expects the AUD/USD to possibly rise to 0.72 by the end of 2025, supported by the RBA's hawkish stance and rising commodity prices. The Traders Union statistical model predicts an average of about 0.6875 by the end of 2026 (range 0.6738 to 0.7012), rising further to 0.725 by the end of 2027.

UBS's outlook is relatively conservative, considering global trade uncertainties and potential changes in Federal Reserve policies, which may limit the AUD's upside. They forecast the exchange rate to stay around 0.68 by the end of the year. Economists at the Commonwealth Bank of Australia suggest that the AUD's recovery may be temporary, predicting a peak around March 2026, followed by a possible decline by year's end.

**Overall judgment** suggests that in the first half of 2026, the AUD is likely to oscillate between 0.68 and 0.70, influenced by Chinese data and US non-farm payroll fluctuations. The AUD is unlikely to decline sharply due to Australia's solid fundamentals and the relatively hawkish stance of the RBA, but given the structural advantage of the US dollar, it will also find it difficult to surge significantly. Short-term pressures mainly stem from China's data performance, while medium- to long-term positives come from resource exports and commodity cycle recovery.

## How to Capture Trading Opportunities in the AUD Trend

The AUD/USD benefits from high liquidity and clear trading rules, making medium- to long-term trend judgment relatively straightforward. Investors can use forex margin trading to seize opportunities, supporting both long and short positions, with leverage ranging from 1 to 200 times. This allows traders to find profit opportunities in both bull and bear markets, with low trading barriers suitable for small and medium investors.

However, it must be emphasized that all investments involve risks. Forex trading is high-risk, and investors may lose all their capital. Investors should carefully assess their risk tolerance before entering the market.

## Summary of the AUD Trend

As a currency of a commodity-exporting country, the AUD's movement is highly correlated with the prices of raw materials such as copper, iron ore, and coal. In the short term, the hawkish stance of the RBA and strong commodity prices will provide support, but in the medium to long term, attention should be paid to global economic uncertainties and the possibility of a rebound in the US dollar, which could lead to increased volatility in the AUD trend.

Although forex market fluctuations are rapid and precise predictions are difficult, the AUD's excellent liquidity, regular volatility patterns, and distinct economic structure make it relatively easier for investors to grasp the medium- to long-term trend direction of the AUD.