AUD/USD Price Forecast: Retreats to near 0.7050, constructive view prevails
- AUD/USD weakens to near 0.7060 in Friday’s early European session.
- The RBA is likely to raise the OCR to 4.10% next week, a Reuters poll showed.
- The positive outlook of the pair remains intact above the key 100-day EMA.
- The first downside target to watch is 0.7020; the immediate resistance level emerges at 0.7120.
The AUD/USD pair loses traction to around 0.7060 during the early European session on Friday. The pair retreats from near three-year highs as rising tensions in the Middle East boost the safe-haven flows, supporting the US Dollar (USD).
US President Donald Trump said that preventing Iran from having nuclear weapons and threatening the Middle East is “of far greater interest and importance to me” than the cost of oil. Meanwhile, Iran’s new supreme leader, Mojtaba Khamenei, stated the Islamic Republic would seek to ensure the Strait of Hormuz remains effectively closed. He added that Tehran would look to open other fronts in the war if the US and Israel persist with their attacks.
On the other hand, aggressive bets that the Reserve Bank of Australia (RBA) will raise interest rates next week might help limit the Aussie’s losses. A Reuters poll showed on Friday that 23 of 30 economists expect the Australian central bank to raise the Official Cash Rate (OCR) to 4.10% on March 17, while seven economists projected no change. The forecast marks a shift from February’s poll, which anticipated rates to remain at 3.85%. The median forecast now sees the cash rate reaching 4.35% by the end of 2026.
Technical Analysis:
In the daily chart, the near-term bias of AUD/USD is mildly bullish as price holds above the rising 100-day exponential moving average and consolidates just under the recent highs. Daily closes have been clustering around the upper half of the Bollinger Bands while the bands have flattened, indicating sustained but moderating upside momentum rather than a blow-off top. The RSI has cooled from overbought readings above 70 toward the mid-50s, showing that bullish pressure persists but with reduced upside acceleration after the early-month surge.
Immediate support emerges at 0.7020, the recent consolidation floor, followed by 0.6950, which aligns with the lower half of the current Bollinger envelope and recent swing lows. A deeper pullback would expose more important support at 0.6900 ahead of the 100-day EMA zone around 0.6840. On the upside, initial resistance sits at 0.7120, the recent closing high, followed by 0.7150 and then 0.7200, where prior upper Bollinger Band extremes suggest stretched conditions.
(The technical analysis of this story was written with the help of an AI tool.)
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.