AUD/USD Price Forecast: Holds key 38.2% Fibo retracement cushion around 0.7100
- AUD/USD flattens at around 0.7117 and is broadly stable above the 38.2% Fibo retracement cushion near 0.7100.
- RBA Governor Bullock says that both higher oil prices and strong demand are fuelling inflationary pressures.
- The Fed is expected to deliver more interest rate hikes this year.
The Australian Dollar (AUD) trades flat at around 0.7117 against the US Dollar (USD) during the European trading session on Tuesday. The antipodean is broadly firm against its peers amid firm expectations that the Reserve Bank of Australia (RBA) will continue tightening its monetary conditions even after delivering three interest rate hikes so far this year.
Australian Dollar Price Last 7 Days
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies last 7 days. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.76% | 0.96% | 2.11% | 0.91% | 0.32% | 0.53% | 0.54% | |
| EUR | -0.76% | 0.19% | 1.34% | 0.09% | -0.49% | -0.11% | -0.25% | |
| GBP | -0.96% | -0.19% | 1.16% | -0.08% | -0.64% | -0.30% | -0.40% | |
| JPY | -2.11% | -1.34% | -1.16% | -1.21% | -1.88% | -1.26% | -1.56% | |
| CAD | -0.91% | -0.09% | 0.08% | 1.21% | -0.64% | -0.07% | -0.36% | |
| AUD | -0.32% | 0.49% | 0.64% | 1.88% | 0.64% | 0.34% | 0.22% | |
| NZD | -0.53% | 0.11% | 0.30% | 1.26% | 0.07% | -0.34% | -0.08% | |
| CHF | -0.54% | 0.25% | 0.40% | 1.56% | 0.36% | -0.22% | 0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Analysts at Commerzbank note that expectations for near-term RBA tightening have intensified, with the bank highlighting that the “RBA’s OIS market is now pricing in 85% chance of a 25bp hike during next week’s monetary policy board meeting.” This elevated probability underscores the increasingly hawkish policy outlook that has been lending support to the Aussie in recent sessions.
Earlier in the day, RBA Governor Michele Bullock didn’t explicitly comment on how the monetary policy will shape in the future, but signaled that the benchmark for neutral rates is rising globally and is supporting bond yields. “Believe neutral rates are rising around the world, pushing up real bond yields,” Bullock said. She warned that high inflation in Australia is coming from energy supply shocks and strong demand environment.
On the US Dollar front, the currency is also broadly firm as the Federal Reserve (Fed) is almost certain to deliver more interest rate hikes this year. According to the CME FedWatch tool, the odds of the Fed delivering at least one more interest rate hike this year are almost 90%.
AUD/USD Technical Analysis
In the daily chart, AUD/USD trades at 0.7120, retaining a mildly bearish bias as it holds beneath the 20-period Exponential Moving Average (EMA) at 0.7138 and the 23.6% Fibonacci retracement at 0.7150.
The pair has slipped back from recent highs, while the Relative Strength Index (14) near 47 suggests consolidating momentum rather than directional conviction, hinting that sellers still have a slight edge while these overhead levels cap the topside.
On the downside, initial support is seen at the 38.2% Fibonacci retracement at 0.7096, followed by the 50.0% level at 0.7052 and the 61.8% retracement at 0.7008, which together outline a broader demand band on pullbacks. On the topside, a daily close above the 20-period EMA at 0.7138 would open the way toward the 23.6% retracement at 0.7150, with stronger resistance emerging at the Fibonacci anchor near 0.7237 where the latest bullish cycle high is located.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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