AUD trend forecast 2025: Why is it under continuous pressure? Can it bottom out and rebound in the future?

The Australian dollar (AUD), as the fifth-largest global trading currency (after the US dollar, euro, Japanese yen, and British pound), has undeniable advantages in trading activity and liquidity. The AUD/USD currency pair benefits from strong market depth and relatively low transaction costs, making it an important tool for many investors for short-term speculation or medium-term positioning.

However, it is worth noting that the AUD is a typical commodity currency. Due to Australia’s economy’s heavy reliance on exports of iron ore, coal, copper, and other raw materials, fluctuations in global commodity prices often directly transmit to the AUD exchange rate. At the same time, as a high-yield currency, the AUD is also a primary target for arbitrage trading and hot money inflows.

The Fundamental Reasons for the Decade-long Weakness of the AUD

Although the AUD once gained investor favor due to export advantages and high interest rates, this attractiveness has significantly diminished over the past decade. From a high of 1.05 in early 2013, the AUD/USD has depreciated by over 35% in the subsequent ten years. During the same period, the US dollar index rose by 28.35%, and major currencies like the euro, Japanese yen, and Canadian dollar also weakened successively. This indicates that the global environment is currently in a strong dollar cycle, and the AUD’s decline is not an isolated case but a reflection of the US dollar’s absolute advantage.

Both technically and fundamentally, the AUD remains in a relatively unfavorable position. This structural disadvantage also explains why, even during rebounds, the AUD finds it difficult to return to historical highs.

Key turning points for the AUD in recent years include:

Q4 2024: The AUD/USD plummeted sharply, with an annual decline of about 9.2%. Entering 2025, influenced by escalating trade tensions and recession expectations, the exchange rate once fell to 0.5933, a five-year low. Analysts point out that US tariff policies disrupted global trade chains, and declining raw material exports directly weakened the commodity currency attributes of the AUD, while narrowing interest rate differentials between Australia and the US accelerated capital outflows.

Mid-2025 rebound: After a brief panic in late April, the AUD began a slow recovery. In September, iron ore and gold prices surged, coupled with market expectations of the Federal Reserve starting a rate-cut cycle, leading to renewed interest in risk assets, and the AUD appreciated rapidly. On September 10, the AUD/USD briefly surged to 0.6636, a new high since November 2024. Although there was some pullback in the past two months, it has remained above 0.64.

AUD Outlook: Three Core Variables

Whether the AUD can achieve a meaningful appreciation rebound depends critically on the evolution of the following three factors:

Central Bank Policies and Domestic Inflation

The Reserve Bank of Australia (RBA) announced at its November meeting to keep the benchmark interest rate at 3.6%, signaling caution. In Q3 2025, Australia’s Consumer Price Index (CPI) rose by 1.3 month-over-month, significantly exceeding market expectations, indicating inflation persistence. The RBA explicitly stated that further easing would only occur after confirming inflation is on a sustainable downward trajectory. This suggests limited probability of rate cuts in the short term, and this relatively hawkish stance provides defensive support for the AUD.

Turning Point of US Dollar Strength

On October 30, the Federal Reserve announced a 25 basis point rate cut to a range of 3.75%-4.00%, marking the second rate cut of the year and initiating balance sheet reduction. However, subsequent comments from Chair Powell clearly dampened market expectations for further rate cuts in December. Despite ongoing discussions about dollar depreciation and de-dollarization, the US dollar index (DXY) has rebounded about 3% from its summer low of 96, with the possibility of breaking above 100 increasing. Historical patterns show that when the dollar strengthens, the AUD tends to weaken, often exhibiting an inverse relationship.

China’s Economic Recovery

Australia’s export structure is highly dependent on China, especially for strategic commodities like iron ore, coal, and natural gas. The strength or weakness of China’s economy directly determines demand for these raw materials, fundamentally supporting the AUD’s movement. When China’s economy expands strongly, resource exports increase in volume and price, boosting the attractiveness of Australian assets. Conversely, if China’s economy continues to slow, especially with a prolonged real estate downturn, concerns over long-term demand for raw materials intensify, and the AUD may weaken accordingly.

Mainstream Institutional Forecasts for the AUD

Regarding the outlook for the AUD in 2025, major financial institutions hold divergent views:

Morgan Stanley is relatively optimistic, expecting the AUD/USD to rise to around 0.72 by the end of the year, supported by the RBA’s potentially hawkish stance and rising commodity prices.

UBS adopts a more cautious attitude, recognizing resilience in the Australian economy but noting increased global trade uncertainties and the possibility of a policy shift by the Fed, which could limit the AUD’s upside. They forecast the year-end rate around 0.68.

The economic team at the Commonwealth Bank of Australia offers the most caution, suggesting that the recent rebound in the AUD may be short-lived. They predict the AUD/USD will reach a cyclical high by March 2026 but may decline again by year-end, reasoning that although the dollar may be relatively weak in 2025, the US economy’s relative advantage could lead to a dollar rebound in 2026.

Outlook for Major Currency Pairs Involving the AUD

AUD/USD Analysis

Currently, the AUD/USD fluctuates within the 0.64-0.66 range. Technically, 0.6450 is a key resistance level; a successful breakout could open the way for further gains, with 0.6373 as an important support. In the short term, if Australian inflation data continues to improve or US economic data weakens, the AUD may test 0.6550-0.6600. Conversely, if US data exceeds expectations or global risk appetite deteriorates, the AUD could retest 0.63 or lower.

Key indicators include US GDP, non-farm payrolls, Australian CPI trends, Federal Reserve policy guidance, and global trade developments.

AUD/CNY Analysis

AUD/CNY closely follows AUD/USD but may have slightly smaller fluctuations due to the relative stability of the RMB. The stability of China-Australia trade relations and the monetary policy stance of the People’s Bank of China will be decisive. If China’s economy remains weak or the RMB faces pressure, AUD/CNY could rise toward 4.8; if the RMB stabilizes amid trade negotiations, the pair may consolidate between 4.6 and 4.75.

AUD/MYR Analysis

The Malaysian ringgit is also sensitive to commodity prices, and its performance correlates with regional economic prospects. If Australian economic data worsens further, AUD/MYR could test support near 3.0; if global commodity demand remains stable, the pair may fluctuate between 3.0 and 3.15.

Trading Strategy Recommendations

Short-term (1-3 days)

• Watch for a breakout above 0.6450 resistance: if AUD/USD stabilizes above this level, consider a long position targeting 0.6464 and 0.6500.
• Monitor the 0.6373 support: if broken, consider short positions aiming for 0.6336 or 0.6300.
• Be cautious before major data releases such as US GDP and Australian CPI; reduce risk exposure ahead of these events.

Medium-term (1-3 weeks)

Bullish scenario: if US employment data softens, inflation declines, or trade tensions ease, consider increasing long positions toward 0.6550-0.6600.

Bearish scenario: if US economic data remains strong or the Fed delays rate cuts, AUD could fall below 0.6250; similarly, disappointing Chinese economic data would also weigh on the AUD.

Long-term Holding Strategy

Investors optimistic about the AUD in the medium term may consider accumulating in phases at current relatively low levels, using time to smooth out volatility. Once an uptrend is confirmed, appropriate position increases can be made.

Overall Assessment

The current AUD/USD is in a phase of technical oscillation and fundamental contest. Short-term trading should focus on range-bound strategies, with breakout follow-up. The medium- to long-term direction hinges on signals from the Fed’s policy stance and the easing of global trade tensions. If upcoming data further reinforce expectations of rate cuts, a bullish setup can be considered; otherwise, caution is warranted regarding potential dollar rebounds.

Traders should closely monitor market sentiment before and after data releases, adjusting strategies flexibly to avoid being overly influenced by a single factor. As a high-volatility asset, the AUD presents both risks and opportunities; prudent position sizing and stop-loss management are essential.