Australian Dollar Trend Dilemma and Rebound Opportunities: A Comprehensive Analysis of Exchange Rate Forecasts and Trading Strategies

As the fifth-largest traded foreign exchange pair globally, AUD/USD has long attracted traders for its liquidity and low spreads, making it suitable for short-term and medium- to long-term positioning. But have you noticed that the Australian dollar has been underperforming for the past decade?

Why has the AUD entered a long-term weakness? Commodity attributes become a “double-edged sword”

AUD is a typical commodity currency, with the Australian economy heavily reliant on exports of iron ore, coal, copper, and other raw materials. This means that any fluctuations in global commodity prices often lead to sharp swings in the AUD exchange rate.

Data shows that in early 2013, AUD/USD peaked at 1.05, then declined by over 35% over the next ten years, while the US dollar index (DXY) surged by 28.35%. Mainstream currencies like the euro, yen, and Canadian dollar also suffered, indicating the market was experiencing a strong dollar cycle. From both technical and fundamental perspectives, the AUD is at a clear disadvantage.

Entering Q4 2024, AUD/USD has plummeted sharply, with an annual decline of about 9.2%. In early 2025, amid escalating global trade tensions and recession expectations, AUD briefly hit a five-year low of 0.5933. Analysts point out that US tariff policies have hurt global trade, raw material exports have declined, and this directly weakens the commodity currency advantage of the AUD. Meanwhile, the interest rate differential between Australia and the US remains difficult to reverse, with domestic economic growth sluggish and overseas capital flowing out rapidly.

When can AUD rebound? Three key variables to watch

RBA Policy and Inflation Outlook

In Q3 2025, Australia’s CPI rose by 1.3% month-over-month, far exceeding market expectations. The Reserve Bank of Australia (RBA) has clearly stated that it will consider further easing only after seeing concrete evidence of sustained and steady inflation decline. This implies limited room for rate cuts in the short term.

Interestingly, the cooling of easing expectations could actually support the AUD—compared to other currencies (like the USD) that are about to or are already cutting rates, the AUD appears more attractive.

US Dollar Strength and Weakness

In October, the Fed cut rates by 25 basis points to a 3.75%-4.00% range, but Chair Powell issued cautious signals afterward, dampening market enthusiasm. Despite discussions about USD depreciation and de-dollarization, the dollar index (DXY) has shown unexpected resilience since bottoming near 96 in summer, rebounding about 3%, with the possibility of breaking above the psychological level of 100 increasing.

China’s Economic Recovery

China is the largest buyer of Australian resource exports. The strength or weakness of China’s economy directly influences demand for iron ore, coal, natural gas, and other commodities—this is the core engine of AUD movement. When China’s economy is robust, resource exports and prices tend to rise together, providing clear support for the AUD; conversely, a sluggish property market and economic slowdown can trigger long-term concerns over raw material demand, leading to a softer AUD.

Diverging forecasts from major institutions on AUD

Morgan Stanley is optimistic, expecting AUD to rise to 0.72 by year-end, citing the possibility of the RBA maintaining a hawkish stance and support from commodity prices.

UBS is more cautious, believing global trade uncertainties and Fed policy shifts will limit AUD gains, projecting around 0.68 by year-end.

CBA economists are the most conservative, suggesting the AUD rebound may be short-lived. They forecast a peak around March 2026, followed by a decline. The USD may be temporarily weaker in 2025, but with the US economy relatively strong, the dollar is expected to rebound later.

Short-term outlook for major AUD pairs

AUD/USD Key Forecast

Currently, AUD/USD hovers around 0.65. The RBA’s decision last month to hold rates steady signals caution, providing some short-term support.

Main factors influencing the trend:

• Policy Divergence: RBA’s pause indicates confidence in inflation control, supporting the AUD, but future policy remains uncertain. The Fed’s moves will continue to dominate USD direction.
• Economic Data: Australia’s inflation has eased, but GDP growth is slowing. High global economic uncertainty means weak upcoming data could reignite rate cut expectations.
• Trade Environment: US tariffs and geopolitical risks remain elevated. As a commodity currency, AUD is closely tied to commodity price movements.

In the short term, expect AUD/USD to fluctuate between 0.63 and 0.66. Better-than-expected inflation data and economic stability could push it above 0.66 resistance; if global risk sentiment worsens or the dollar strengthens, it could fall back to 0.63 or lower.

AUD/CNY Outlook

Stable Sino-Australian trade relations support AUD/CNY. The Chinese economy’s performance, influenced by central bank policies and US-China relations, significantly impacts this pair.

Recent Chinese data (October services PMI at 52.6) is moderate, but progress in US-China trade talks (such as tariff reductions) may ease RMB depreciation pressures. Since AUD/CNY closely follows AUD/USD, RMB volatility is relatively low, and declines may be slightly smaller than against the USD.

Over the next 1-3 months, with RMB relatively stable, expect AUD/CNY to fluctuate between 4.6 and 4.75. If RMB weakens due to domestic economic pressures or external factors, AUD/CNY could briefly rally toward 4.8.

AUD/MYR Outlook

Malaysia’s economy also relies on exports and raw materials, with MYR sensitive to commodity prices. Stable global demand favors MYR strength. Weakness in the Australian economy could limit AUD’s rebound.

Bank of Malaysia’s policy is relatively steady or slightly hawkish; if the interest rate differential widens, MYR may benefit. A pause or slowdown in RBA rate cuts would reduce downward pressure on AUD/MYR.

Amid global economic uncertainties, expect AUD/MYR to trade between 3.0 and 3.15. If Australian economic data deteriorates further, it could test support near 3.0.

Trader strategies for the short, medium, and long term

Short-term trading ideas (1-3 days)

Long opportunities: When price breaks above 0.6450 resistance, consider small long positions targeting the 200-day moving average at 0.6464 and the psychological level of 0.6500. Triggered by weak US GDP or non-farm payrolls (suggesting faster Fed rate cuts), or stronger-than-expected Australian CPI. Stop-loss at 0.6420.

Short opportunities: When price falls below the 10-day moving average support at 0.6373, consider short positions targeting 0.6336 (recent low) or even 0.6300. Triggered by strong US economic data or rising Australian inflation. Stop-loss at 0.6400.

Wait-and-see: Before key data releases (US GDP, core PCE, Australian CPI), reduce positions or exit to avoid heightened volatility.

Medium-term positioning (1-3 weeks)

Bullish scenario: Expectations of Fed rate cuts rising, US employment weakening, inflation falling, and easing trade tensions could boost risk sentiment, pushing AUD toward 0.6550-0.6600. A break above the 200-day moving average at 0.6464 could signal a medium-term reversal, prompting additional longs. Risks include rising Australian inflation, unexpected USD weakness, or geopolitical shocks.

Bearish scenario: Strong US economic resilience, robust non-farm and GDP data, and delayed Fed easing could strengthen the dollar, pushing AUD down toward 0.6250 (yearly low). Risks include poor Australian trade data or weak Chinese economic indicators.

Long-term positioning: For those optimistic about AUD’s long-term prospects, consider phased accumulation at current lows, using time to smooth out volatility, especially if a bullish trend is confirmed.

Investment key points summary

Currently, AUD/USD is at a critical juncture of technical consolidation and fundamental tension. Short-term trading should focus on the 0.6370-0.6450 range, with breakout follow-up. Medium- to long-term direction depends on clear signals of Fed policy shifts and whether global trade risks substantially ease.

If this week’s data reinforce rate cut expectations, consider bullish positioning; otherwise, remain cautious of USD rebound pressures. The difficulty in forecasting AUD stems from its high sensitivity to global macroeconomic changes. Traders should closely monitor market sentiment before and after data releases and adjust strategies flexibly.

All investment decisions should be made cautiously, considering risks. Forex trading involves high risk, and investors may face total loss of capital.