AUD/USD maintains minimal gains of 0.10% at the end of the North American session, but could end the week with a gain of 0.84%. At the time of writing, the pair is trading above 0.7200 while a bullish takeover chart pattern limits the Australian bearish side.
AUD/USD Price Forecast: Technical Outlook
Technically, AUD/USD is trading near the top of the 100-pip consolidation range between 0.7100 and 0.7200, with traders waiting for fresh catalysts. The momentum is bullish, as reflected by the relative strength index (RSI) being above the neutral level.
On the other hand, the first resistance for AUD/USD is the psychological level of 0.7250. If cleared, the next stop would be June 3, 2022, with a high of 0.7282 before the 0.7300 area. The next area of interest will be 0.7661 on April 5, 2022
Conversely, if AUD/USD ends the day below 0.7200, it could open the door to testing the 20-day SMA at 0.7121. Below this level is 0.7100 – the bottom of the 100-pip range – followed by the 50-day SMA at 0.7059
AUD/USD price chart – daily
Australian Dollar FAQs
One of the most essential 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 protected 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 exploit 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.
