AUD/USD Price Forecast: Further upside hinges on tariffs

The Australian Dollar (AUD) added to its Tuesday’s comeback, motivating AUD/USD to trespass the key 0.6300 barrier to flirt with weekly tops and challenge the interim 100-day SMA at the same time.

On the other side, the US Dollar (USD) remained on the back foot, sending the US Dollar Index (DXY) to the area of three-day troughs in the 103.75-103.70 band amid mixed yields and increasing anxiety prior to Trump’s announcements.

Tariff tensions loom large

Despite occasional sparks of optimism, concerns over additional US tariffs remain a major stumbling block for global markets. The White House is poised to unveil reciprocal tariffs later on Wednesday, which could set off a fresh round of retaliatory measures by key trading partners and rattle investor sentiment.

The Aussie Dollar, heavily tied to worldwide risk appetite and Chinese commodity demand, is particularly vulnerable to any slowdown in China’s economy. On the bright side, China’s Caixin Manufacturing PMI unexpectedly improved to 51.2 in March, giving the Aussie a short-term boost that helped fuel its modest rebound.

The Fed’s delicate balancing act

Meanwhile, the Federal Reserve (Fed) faces a tricky task: ongoing trade tensions could spark higher inflation, potentially justifying extended rate hikes. Yet early signs of a cooling US economy argue for restraint, even with employment figures still solid.

At its March 19 meeting, the Fed kept its benchmark rate steady at 4.25–4.50% and reiterated a patient “wait-and-see” stance. Chair Jerome Powell highlighted the need for caution, underscoring forecasts that point to slower growth and marginally higher inflation—some of which could be magnified by looming tariffs.

RBA holds steady, but stays wary

In Australia, the Reserve Bank (RBA) left its Official Cash Rate (OCR) at 4.10% on Tuesday, as markets had widely anticipated. Notably, the RBA dropped its previous statement that it “remains cautious on prospects for further policy easing.” Instead, officials flagged ongoing risks on both sides of the economic equation, signalling that the path forward is far from clear.

During the post-meeting press conference, RBA Governor Michele Bullock acknowledged a lack of “100% confidence” in inflation’s trajectory toward the 2–3% target range. She also noted that the decision to keep rates unchanged was unanimous, with no direct discussion of cutting rates. Following the announcement, market odds of a 25-basis-point cut at the May 20 meeting slipped to 70%, down from 80%.

Bears circle the Aussie

In the background, traders are stepping up their bearish bets on the Aussie. The latest CFTC data shows net short positions near 80K contracts as of March 25—a multi-week peak that has climbed steadily since mid-December, driven largely by escalating tariff worries.

AUD/USD technical outlook

A decisive push above the 2025 peak at 0.6408 (February 21) could pave the way for a test of the 200-day SMA at 0.6503, with the November 2024 high at 0.6687 emerging as the next significant hurdle.

If sellers regain control, initial support appears at the March low of 0.6186 (March 4), and a clean break below this floor would open the door for a retest of the 2025 trough at 0.6087, just above the psychological 0.6000 level.

Meanwhile, the RSI edging toward 50 hints at a resurgence in upside momentum, though the subdued ADX near 11 indicates that the broader trend remains weak.

In short, while the Aussie Dollar has found some temporary footing, the currency’s trajectory remains bound up in the fate of global trade tensions, Chinese growth prospects, and central bank policy moves.