The Truth About the Future Trend of the AUD: Why It Always Rebounds and Finds It Difficult to Break Through

The future trend of the Australian dollar is one of the most closely watched topics among current currency market investors. As the fifth-largest traded currency globally, AUD/USD remains highly active, with strong liquidity and low spreads attracting many short-term traders and medium- to long-term investors. However, the confusing part is that although the AUD occasionally rebounds, it has struggled to break through key resistance levels and remains under pressure. The reasons behind this require a deeper understanding of the economic structure and global capital flows.

Ten-Year Depreciation Background: How the AUD Fell into a “Strong Dollar” Cycle

Looking back to early 2013 at the 1.05 level, AUD/USD depreciated over 35% in the following decade, while the US dollar index rose by 28.35%. This is not unique to the AUD—EUR, JPY, and CAD also showed depreciation against the dollar, indicating a prolonged cycle of a strong dollar globally.

Why has the AUD been so weak? Historical data provides a clear answer. From 2009 to 2011, China’s robust economic recovery drove commodity prices sharply higher, and Australian interest rates were significantly higher than those in the US, pushing the AUD close to 1.05. But as time passed and from 2023 to 2024, with China’s recovery momentum weakening and markets oscillating at high levels, the AUD’s performance against the dollar remained weak, and the interest rate differential gradually narrowed.

This means that the two main pillars supporting the AUD’s strength—commodity demand and interest rate advantage—are now loosening. Whenever the AUD approaches previous highs, market selling pressure increases, reflecting limited confidence in this currency. Market analysis generally attributes this to the impact of US tariff policies on global trade, the decline in raw material exports (metals, energy), directly undermining the AUD’s status as a commodity currency. Coupled with the difficulty in reversing the interest rate differential with the US and sluggish domestic economic growth, the AUD now resembles a currency with “rebound potential but lacking a clear trend”—its movements are often driven by external factors rather than fundamentals.

Three Core Variables Determine the AUD’s Future Direction

To assess whether the AUD can reverse its downward trend, investors should focus on the following three decisive factors:

1. The monetary policy stance of the Reserve Bank of Australia (RBA). The AUD has long been viewed as a high-yield currency, with its attractiveness heavily dependent on the interest rate differential. Currently, the RBA cash rate is about 3.60%, and market expectations are gradually shifting toward a possible rate hike again in 2026, with the Commonwealth Bank of Australia (CBA) even forecasting a peak of around 3.85%. If inflation remains sticky and the employment market stays resilient, a hawkish RBA stance could help restore the interest rate advantage for the AUD. Conversely, if rate hike expectations falter, the currency’s support will weaken significantly. This variable determines whether the “carry trade” benefits of the AUD can be reactivated.

2. Fluctuations in China’s economy and commodity prices. Australia’s export structure is highly concentrated in iron ore, coal, and energy, making the AUD essentially a commodity currency. The core variable is China’s infrastructure and manufacturing activity—when Chinese demand rebounds, iron ore prices tend to rise in tandem, and the AUD usually reflects this quickly in the exchange rate. However, if China’s recovery momentum weakens, even short-term rebounds in commodities may lead to “sharp rises followed by declines” in the AUD. Recently, energy prices have risen, but global demand remains weak, and investors tend to prefer safe-haven assets over cyclical currencies, directly limiting the AUD’s upside potential.

3. The US dollar trend and global risk sentiment. From a capital flow perspective, the Federal Reserve’s policy cycle remains central to the global forex market. In a rate-cut environment, a weaker dollar generally benefits risk currencies like the AUD; the AUD tends to perform well under such conditions. However, if risk aversion increases and capital flows back into the dollar, the AUD can come under pressure even if its fundamentals haven’t worsened. This variable determines the direction of global capital flows—whether toward risk assets or safe havens.

For the AUD to enter a genuine medium- to long-term bullish phase, all three conditions must be met simultaneously: the RBA adopts a hawkish stance again, Chinese demand substantively improves, and the dollar enters a structural weakening phase. If only one or two of these are in place, the AUD is more likely to remain in a range-bound oscillation rather than a clear upward trend.

How Major Institutions View the AUD: Diverging Optimistic and Cautious Forecasts

Forecasts for the AUD’s future vary significantly among major international institutions, reflecting market uncertainty about its prospects.

The optimistic camp, led by Morgan Stanley, expects the AUD to rise to around 0.72 by the end of 2025. This outlook is mainly based on the RBA maintaining a hawkish stance and the strengthening of commodity prices. Similarly, the Traders Union’s statistical models project an average of about 0.6875 (range 0.6738–0.7012) for 2026, rising further to 0.725 by 2027, emphasizing the strength of the Australian labor market and a recovery in commodity demand. These optimistic forecasts share the view that if the US economy achieves a soft landing and the dollar index declines, the AUD—being a commodity currency—will perform well.

The cautious side holds a different view. UBS, for example, believes that despite Australia’s resilient economy, global trade uncertainties and potential shifts in Fed policy could limit the AUD’s gains, projecting the exchange rate around 0.68 by year-end. The Australian Commonwealth Bank’s economists suggest that the AUD’s recovery may be short-lived, forecasting a peak around March 2026, followed by a possible decline by the end of 2026. Some Wall Street analysts warn that if the US avoids recession but the dollar remains super-strong due to interest rate differentials, the AUD will struggle to break through the 0.67 resistance level.

From personal observation, the AUD is likely to fluctuate between 0.68 and 0.70 in the first half of 2026, influenced by Chinese economic data and US non-farm payroll reports. It won’t crash sharply because Australia’s fundamentals remain solid and the RBA remains relatively hawkish; but it also won’t surge to new highs due to the persistent structural strength of the dollar. Short-term pressures mainly stem from Chinese data volatility, while medium- to long-term positives depend on sustained resource exports and a commodity cycle revival.

AUD Investment Strategy: How to Find Opportunities Amid Volatility

For investors interested in trading the AUD/USD, it is one of the top five most traded forex pairs worldwide, favored for its high liquidity and predictable volatility. Although predicting exact exchange rate movements is challenging, the AUD’s characteristics make medium- to long-term trend analysis relatively straightforward.

Investors can participate through forex margin trading, which allows both long and short positions, and leverage of 1-200 times. This method offers opportunities to profit in bullish markets and potential gains in bearish markets. The low trading threshold makes it especially suitable for small and medium-sized investors.

However, it is crucial to remember that all investments carry risks. Forex trading is high-risk, and investors may lose all their capital. Before trading, thoroughly understand the market, develop risk management strategies, and act cautiously according to your risk tolerance.

Conclusion on the AUD’s Future Trend

Overall market analysis indicates that Australia’s status as a commodity-exporting country remains evident, with the AUD closely linked to iron ore, coal, and other raw material prices. In the short term, a hawkish RBA stance and strong commodity prices will provide support. But in the medium to long term, global economic uncertainties and potential dollar rebounds will limit upside and lead to more oscillation.

The key to the AUD’s future is whether a “rebound can turn into a trend.” Although forex markets are volatile and difficult to predict precisely, the AUD’s high liquidity, predictable volatility, and distinct economic structure make medium- to long-term trend analysis more accessible. Investors aiming to grasp the AUD’s future should continuously monitor RBA policy shifts, Chinese economic data, and the US dollar cycle, seeking trading opportunities amid the interaction of these three variables.