AUD/USD Forecast and News
Australian Dollar recovers recent losses as RBA hike expectations grow
The Australian Dollar advanced against the US Dollar, recovered its losses on Friday. The AUD/USD pair faced challenges amid broad-based selling in global equities and other risk-sensitive assets. The commodity-linked AUD, often seen as a liquid barometer of global risk sentiment, came under pressure as a tech-driven stock sell-off, sparked by worries over heavy AI-related spending, rattled investor confidence.
Latest Australian Dollar News
AUD/USD Technical Overview
The AUD/USD pair is trading around 0.6910 on Friday. Daily chart analysis indicates that the pair is positioned below the ascending channel pattern, indicating a potential for a bearish reversal. However, the 14-day Relative Strength Index (RSI) is at 57, signaling ongoing bullish momentum.
The AUD/USD pair may test the immediate barrier at the nine-day Exponential Moving Average (EMA) of 0.6946. A rebound within the ascending channel would strengthen the bullish bias and target 0.7094, the highest level since February 2023, which was recorded on January 29. A break above this level would support the pair to test the upper ascending channel boundary around 0.7270. On the downside, the primary support lies at the 50-day EMA at 0.6771.
Fundamental Overview
The Reserve Bank of Australia (RBA) Governor Michele Bullock’s comments, saying that the board lifted the Official Cash Rate (OCR) because the economy is more capacity-constrained than previously judged, meaning policy needed to be tighter. Bullock added that the RBA needs to dampen demand growth unless supply capacity can expand faster.
Australia’s Trade Balance data showed on Thursday that the trade surplus widened to AUD 3,373M in December 2025, up from a downwardly revised AUD 2,597M in November and slightly above market expectations of AUD 3,300M. Meanwhile, Exports grew 1.0% month-on-month (MoM) in December, rebounding from an upwardly revised 4.0% drop in November, largely driven by metal ores and minerals. Imports fell 0.8% MoM, steeper than the downwardly revised 0.2% decline previously, weighed down by other merchandise goods.
The Reserve Bank of Australia (RBA) raised the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85% on Tuesday, citing stronger-than-expected growth and a sticky inflation outlook. As the tightening cycle begins, markets have lifted the probability of a May hike to 80% and now price in roughly 40 bps of further tightening over the rest of the year.
US Dollar declines after two days of gains
The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, declines after two days of gains and is trading near 97.90 at the time of writing.
Traders will watch the preliminary February Michigan Consumer Sentiment Index, due for release later in the North American session.
The Greenback softens as recent US labor data point to a cooling job market, reinforcing dovish Fed expectations. Markets now price two rate cuts this year, starting in June, with another potentially in September.
The CME FedWatch tool suggests that markets are pricing in nearly a 77.3% chance that the Federal Reserve (Fed) will hold interest rates steady at its March policy meeting, with anticipation of a first rate reduction in June.
Data from the US Department of Labor showed Initial Jobless Claims rose to 231K in the week ending January 31, above estimates of 212K and the prior 209K. Meanwhile, ADP reported private payrolls rose by just 22K in January, well below expectations of 48K and the previous 37K (revised from 41K).
Fed Governor Lisa Cook said she would not back another cut without clearer evidence that inflation is easing, stressing greater concern over stalled disinflation than labor market weakness.
Investors also weighed the implications of Kevin Warsh’s nomination as Fed chair, citing his preference for a smaller balance sheet and a less aggressive approach to rate reductions. Meanwhile, US President Donald Trump said he would not have nominated Warsh if he favored rate hikes. Trump further stated that there was “not much” doubt the US central bank would lower rates because “we’re way high in interest,” but now “we’re a rich country again.”
ADP Employment Change showed private payrolls increased by just 22K in January, well below market expectations for a stronger 48K reading and 37K (revised from 41K) prior. The weak print carried extra weight given the postponement of official government data.
China's Services Purchasing Managers' Index (PMI) rose to 52.3 in January from 52.0 in December. This figure came in stronger than the expectations of 51.8. China is a key trading partner of Australia, so any changes in the Chinese economy could impact the AUD.
Australia’s S&P Global Composite PMI rose to 55.7 in January from 51.0 in December. The expansion was the strongest in 45 months. Meanwhile, Services PMI climbed to 56.3 from 51.1, marking its highest level since February 2022. The reading beat the flash estimate of 56.0 and remained above the 50.0 threshold, extending the run of expanding services activity to two years.
Latest AUD Analysis
Editors' picks
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Bitcoin: The worst may be behind us
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Majors
Cryptocurrencies
Signatures
AUD/USD YEARLY FORECAST
What would happen to the AUD/USD this year? A brief update from our experts on where the AUD/USD can go in the upcoming months.
AUD/USD FORECAST 2025
The battle between the Australian Dollar (AUD) and the US Dollar (USD) will be one worth watching in 2025, with central banks stealing the limelight. The Reserve Bank of Australia (RBA) has kept interest rates at record highs whilst most of its overseas counterparts started the loosening process. The US Federal Reserve (Fed), on the other hand, has trimmed the benchmark interest rate by 100 bps through 2024 and aims to slow the pace of cuts in 2025. The central banks’ imbalance aims for record lows in AUD/USD.
MOST INFLUENTIAL POLITICAL EVENTS IN 2025 FOR AUD/USD
Beyond central banks, market players will be attentive to tariffs. The second coming of Donald Trump to the White House anticipates a global Trade War that could fuel inflationary pressures not only in the United States, but also in all major economies.
Given Trump’s personal battle with China, the Australian economy could end up benefiting from fresh commercial interactions with its neighbour giant.
About AUD/USD
AUD/USD
The AUD/USD currency pair, commonly known as the "Aussie", represents how many US dollars (the quote currency) are needed to purchase one Australian dollar (the base currency). Alongside the New Zealand Dollar (NZD) and the Canadian Dollar (CAD), the AUD is considered a commodity currency due to Australia’s significant exports of raw materials such as precious metals, Oil, and agricultural products.
The Reserve Bank of Australia (RBA) has historically maintained higher interest rates compared to other industrialized nations. Combined with the relatively high liquidity of the AUD, this has made the AUD attractive for carry traders looking for higher yields.
Australia’s economy and currency are closely tied to China, its largest trading partner. Any changes in the Chinese economy can significantly impact the AUD. Additionally, the Australian Dollar is often seen as a diversification tool due to its exposure to Asian economies.
The pair AUD/USD also correlates with Gold prices. Gold is widely viewed as a safe haven asset against inflation and it is one of the most traded commodities.
INFLUENTIAL ORGANIZATIONS AND PEOPLE FOR THE AUD/USD
Reserve Bank of Australia (RBA)
The Reserve Bank of Australia (RBA) is Australia's central bank, deriving its functions and powers from the Reserve Bank Act 1959. Its primary duty is to contribute to currency stability, full employment and the economic prosperity and welfare of the Australian people. The RBA achieves this by setting the cash rate to meet a medium-term inflation target of between 2% and 3%, maintaining a strong financial system and efficient payment infrastructure and issuing the nation's banknotes.
Decisions are made by a board of governors at eight meetings a year and ad hoc emergency meetings as required.
The RBA provides banking services to the Australian Government, its agencies and several overseas central banks and official institutions. Additionally, it manages Australia's gold and foreign exchange reserves.
The official website, on X and YoutubeThe Federal Reserve (Fed)
The Federal Reserve (Fed) is the central bank of the United States (US) and it has two main targets: to maintain the unemployment rate at its lowest possible levels and to keep inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors and the partially appointed Federal Open Market Committee (FOMC). The FOMC organizes eight scheduled meetings in a year to review economic and financial conditions. It also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. The FOMC Minutes, which are released by the Board of Governors of the Federal Reserve weeks after the latest meeting, are a guide to the future US interest-rate policy.
Fed official website, on X and FacebookMichele Bullock
Michele Bullock is an Australian economist and the current Governor of the Reserve Bank of Australia. She assumed the role in September 2023 and is the first woman to hold the position. She is the Chair of the Reserve Bank Board, Payments System Board and Council of Financial Regulators. Prior to her current role, Bullock was the Deputy Governor of the RBA.
Bullock on her RBA profile and Wikipedia.
Jerome Powell
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. He was sworn in on May 23, 2022, for a second term as Chairman ending May 15, 2026. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
Jerome Powell Fed's Profile and Wikipedia.
RBA NEWS & ANALYSIS
FED NEWS & ANALYSIS
ASSETS THAT INFLUENCE AUD/USD THE MOST
- Currencies: The Japanese Yen (JPY) and the Chinese Yuan (CNY), as Japan and China are the most significant trading partners of Australia. Other relevant currency pairs include EUR/USD, GBP/USD, USD/JPY, USD/CHF, NZD/USD and USD/CAD.
- Commodities: The most important is Gold, alongside Iron Ore and Natural Gas.
- Bonds: GACGB10 (Australia 10-year Government Bond Yield), and T-Note 10Y ( 10-year US Treasury note).