The AUD/USD pair struggles to capitalize on the previous day’s strong move up and trades with a mild negative bias through the first half of the European session on Thursday. Spot prices, however, manage to hold above the 0.7100 mark and seem poised to appreciate further amid a combination of supporting factors.
The monthly Australian consumer inflation figures released on Wednesday lifted market bets for another interest rate hike by the Reserve Bank of Australia (RBA) in May, which might continue to underpin the Aussie. The US Dollar (USD), on the other hand, remains on the defensive amid the uncertainty surrounding US President Donald Trump’s trade policies. This, along with a positive tone around the equity markets, validates the near-term positive outlook for the AUD/USD pair.
The overnight breakout through an over one-week-old trading range hurdle, around the 0.7100 mark, was seen as a key trigger for bulls. Moreover, spot prices hold above the rising 100-period Exponential Moving Average (EMA) on the 4-hour chart, keeping the recent upswing intact. The Moving Average Convergence Divergence (MACD) line stands above the signal line, marginally in positive territory, and the positive histogram, though modest, suggests buyers retain control on dips.
Meanwhile, the Relative Strength Index at 58 stays above its midline, signalling positive but not extreme momentum. Immediate support emerges at 0.7080, followed by firmer backing at the 0.7040 region near the 100-period EMA. A break below 0.7040 would weaken the bullish structure. On the upside, initial resistance sits at 0.7125, just above the recent highs, with a sustained push through this barrier opening the way toward 0.7170 as the next resistance zone.
(The technical analysis of this story was written with the help of an AI tool.)
AUD/USD 4-hour chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Source: https://www.fxstreet.com/news/aud-usd-price-forecast-bulls-have-the-upper-hand-above-07100-range-breakout-in-play-202602260857
