The AUD/USD pair opened with a modest bearish gap on Monday and touched a one-week low during the Asian session, though it lacked follow-through selling. Spot prices currently trade around the 0.7000 psychological mark, down 0.25% for the day,
A further escalation of tensions in the Middle East, along with reduced bets for more rate cuts by the US Federal Reserve (Fed), acts as a tailwind for the US Dollar (USD) and weighs on the AUD/USD pair. However, the Reserve Bank of Australia’s (Fed) hawkish stance offers some support to the Aussie and helps limit the downside for the currency pair.
From a technical perspective, the near-term bias turns mildly bearish as the AUD/USD pair slips back below the gently rising 200-period Exponential Moving Average (EMA) on the 4-hour chart, signaling fading upside control after last week’s recovery attempts stalled above 0.7100. The Moving Average Convergence Divergence (MACD) line has moved below its signal and dropped back under the zero line with a modestly negative histogram, suggesting bearish momentum is rebuilding after a short period of balance.
Furthermore, the Relative Strength Index (RSI) near 37 stays below the 50 midline without reaching oversold territory, reinforcing a downside tilt but leaving room for further weakness before exhaustion emerges. However, it would still be prudent to wait for a subsequent decline below the 0.6960-0.6950 horizontal support before positioning for an extension of the recent retracement slide from the highest level since June 2022, touched earlier this month.
On the upside, immediate resistance now appears at the 0.7030 area, where the 200-period EMA converges with the latest breakdown point. A sustained recovery above the said hurdle is needed to ease the current bearish pressure and open the path back toward 0.7085 en route to the recent swing high at 0.7115.
(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-bears-have-the-upper-hand-near-07000-200-ema-breakdown-in-play-202603230143
