The Australian dollar (AUD) fell against the US dollar (USD) on Friday, with the AUD/USD rate extending losses for a fourth straight day, while the Australian dollar remains broadly supported amid continuing geopolitical tensions in the Middle East. At the time of writing, the pair is trading around 0.6866, falling to fresh two-month lows.
The US dollar continues to draw support from its status as the world’s main reserve currency, with investors turning to the US dollar to meet financing needs and seek security during periods of increased market stress.
At the same time, rising oil prices are indirectly increasing demand for the US dollar as global oil transactions are mainly priced in dollars, putting risk-sensitive currencies such as the Australian dollar under constant pressure.
The US Dollar Index (DXY), which tracks the value of the dollar against a basket of six major currencies, is trading around 100.19 and is likely to end the week up by more than 0.50%. Meanwhile, AUD/USD is headed for a weekly decline of more than 2%, marking the steepest decline since October 2025.
From a technical perspective, the AUD/USD outlook has turned bearish after breaking below the psychological level of 0.7000, which is close to the 50-day elementary moving average (SMA) at 0.7015.
The recent decline also brought the pair below the multi-month support zone around 0.6900, adding to downward pressure and signaling a shift in near-term market structure.
The relative strength index (RSI) is retreating towards 37, showing weakening momentum, but without reaching the oversold area, suggesting room for further downward pressure. The moving average convergence divergence (MACD) line remains below the signal and drifts deeper into negative territory, with the negative histogram expanding slightly, strengthening the bearish tone in the miniature term.
On the other hand, immediate support is seen at the 100-day elementary moving average (SMA) around 0.6815. Closing the day below this level could expose another bearish target near the psychological level of 0.6700, the previous breakout zone that could limit further declines.
On the other hand, the 0.6900 zone is now acting as immediate resistance, having previously served as a key support level. A sustained move above the 100-day SMA near the 0.7000 break would be needed to ease the bearish pressure and signal a continuation of the uptrend.
Australian Dollar FAQs
One of the most critical factors for the Australian dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor influencing price is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as Australia’s inflation, its dynamics and its trade balance. Market sentiment – whether investors take on riskier assets (risk-on) or look for safe and sound havens (risk-off) – also matters, with positive risk for the AUD.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the interest rates that Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA’s main goal is to maintain a stable inflation rate of 2-3% by raising or lowering interest rates. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low ones. The RBA may also apply quantitative easing and tightening to influence lending conditions, the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian dollar (AUD). When the Chinese economy does well, it buys more raw materials, goods and services from Australia, increasing demand for the AUD and increasing its value. The opposite is the case when the Chinese economy is not growing as quick 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, worth $118 billion a year in 2021 figures, with China being the main buyer. The price of iron ore can therefore influence the Australian dollar. Generally speaking, if the price of iron ore increases, the AUD also increases, as aggregate demand for the currency increases. The opposite is true when 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 for the AUD.
The trade balance, or the difference between what a country earns from exports and what it pays for imports, is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought after export, then its currency will only appreciate in value as a result of the excess demand created by foreign buyers wanting to buy its exports compared to spending on import purchases. Therefore, a positive net trade balance strengthens the AUD, and the effect is opposite if the trade balance is negative.
