AUD/USD Price Forecast: All the attention shifts to the RBA

The Australian Dollar (AUD) added to Friday’s retracement on Monday, with AUD/USD slipping back to the low-0.6200s in quite a bearish start to the new trading week. The continuation of the pair’s decline was fueled primarily by a firmer US Dollar (USD), which came under fresh buying pressure on the back of renewed trade uncertainties and a generalised risk-off mood.

As a result, the US Dollar Index (DXY) returned to the 104.40 region after bottoming out near 103.70 during early trade.

Risk sentiment on edge as tariff fears resurface

Despite intermittent bouts of optimism, the threat of additional US trade measures remains a persistent worry. Fresh tariffs could spark retaliatory moves from major trading partners, undermining market sentiment and weighing on risk assets.

The Aussie, highly sensitive to global risk appetite and Chinese demand for commodities, is particularly exposed. Any hint of slowing Chinese growth could reverberate through Australia’s economy, impacting GDP and pressuring the currency. In the latest development, President Trump has introduced 25% tariffs on US automobile imports, with reciprocal measures looming on the horizon.

The Fed walks a tightrope

The Federal Reserve (Fed) finds itself in a delicate balancing act. Trade tensions risk stoking inflation, which could justify keeping rates higher for longer. However, early signs of a cooling US economy argue for caution—despite the still-robust labour market.

Last week, the Fed left rates steady at 4.25–4.50% and emphasized a “wait-and-see” approach. Fed Chair Jerome Powell underscored patience, even as the central bank’s projections point to lower growth and slightly higher inflation ahead—driven in part by tariff-related pressures.

RBA waits on inflation clarity

Across the Pacific, the Reserve Bank of Australia (RBA) is widely expected to keep its OCR at 4.10% at its meeting on April 1.

At the latest gathering, Governor Michele Bullock has reiterated that future decisions will hinge on incoming inflation data, while Deputy Governor Andrew Hauser cautioned against assuming a rapid series of cuts.

Later Minutes from that meeting revealed a close debate between pausing and opting for a smaller reduction. Australia’s strong labour market gave policymakers some leeway, but February’s unexpected employment decline (–52.8K) and an unchanged 4.1% jobless rate raised eyebrows. Recent monthly inflation readings also showed signs of easing, with the Weighted Mean CPI down to 2.4% and the Trimmed Mean CPI at 2.7% in Q4. While these align with the RBA’s outlook, the bank traditionally focuses on quarterly figures for policy guidance.

Markets currently price in another rate cut by July, with nearly 70% expecting a move as early as May.

Speculative sentiment sours on AUD

Bearish positioning on the Aussie continues to rise. The latest CFTC data shows net short positions climbing to a multi-week peak of nearly 80K contracts as of March 25, a trend that has accelerated since mid-December in response to escalating tariff concerns.

AUD/USD technical picture

- Upside Potential: A decisive break above the 2025 high at 0.6408 (February 21) could set the stage for a run at the 200-day SMA at 0.6507. Beyond that, the November 2024 peak of 0.6687 stands as a key resistance level.

- Downside Risk: If sellers regain control, initial support emerges at the March low of 0.6186 (March 4). A breach there opens the door to a test of the 2025 trough at 0.6087, followed by the psychologically significant 0.6000 mark.

- Momentum Signals: The RSI hovering near 41 points to rising bearish momentum, while a subdued ADX reading around 10 indicates the current trend lacks strong conviction.