50 within reach for RSI: AUD/USD Price Forecast as double bottom develops

AUD/USD advances, with US Dollar weakness and a hawkish RBA underpinning the Australian Dollar.
Buyers appear to be regaining traction as a possible double bottom takes shape.
Key daily moving averages still cap the pair despite improving momentum.

AUD/USD trades around 0.7002 at the time of writing. Near one-week highs, the pair is posting a third consecutive daily gain on Tuesday. Support comes from the US Dollar (USD), which has retreated from last week’s 18-month highs. Meanwhile, the hawkish stance of the Reserve Bank of Australia (RBA) continues to underpin demand for the Australian Dollar (AUD).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A possible double bottom around 0.6900 points to an improving technical outlook. After several weeks of selling, buyers appear to be returning gradually. The rebound remains constrained, however, as AUD/USD is still trading beneath key daily moving averages.

Selling pressure has moderated, but buyers do not yet have a firm grip. The Relative Strength Index (RSI) has climbed out of oversold territory towards 49, while the Moving Average Convergence Divergence (MACD) is slightly positive.

The first upside hurdle lies at 0.7026, the 38.2% Fibonacci retracement. Next are the 100-day SMA at 0.7035 and the 200-day SMA at 0.7047. A firmer resistance area spans the 50.0% retracement at 0.7067 and the 50-day SMA at 0.7077. Beyond that, a broader resistance band comprises the 61.8% retracement at 0.7107, the 78.6% level at 0.7165 and the cycle-high area near the 100.0% retracement at 0.7238.

Immediate downside support sits at 0.6976, the 23.6% retracement. If this gives way, the pair could revisit the 0.6895-0.6900 support area, the location of the possible double bottom.

(The technical analysis of this story was written with the help of an AI tool. Learn more.)

Australian Dollar: Key Questions

Australian Dollar: Main Market Drivers

Interest rates set by the Reserve Bank of Australia (RBA) are a major driver of the Australian Dollar (AUD). Australia’s abundant resources also make the price of iron ore, its largest export, a key influence. Other factors include the economic health of China, Australia’s biggest trading partner, alongside domestic inflation, economic growth and the trade balance. Investor appetite for risk matters too. A shift towards riskier assets, known as risk-on sentiment, supports the AUD, while a preference for safe havens is described as risk-off.

RBA Policy and the Australian Dollar

By setting the interest rate at which Australian banks lend to one another, the Reserve Bank of Australia (RBA) affects borrowing costs across the economy and, in turn, the Australian Dollar (AUD). Its primary objective is stable inflation of 2-3%, pursued through increases or reductions in interest rates. Rates that are relatively high compared with those of other major central banks support the AUD; relatively low rates have the reverse effect. The RBA can also adjust credit conditions through quantitative easing or tightening. Easing weighs on the AUD, whereas tightening supports it.

China’s Economy and AUD Demand

As Australia’s largest trading partner, China has a substantial influence on the Australian Dollar (AUD). A strong Chinese economy buys more Australian raw materials, goods and services, increasing demand for the AUD and lifting its value. Growth that falls short of expectations has the opposite effect. Consequently, upside and downside surprises in Chinese growth figures often directly affect the Australian Dollar and its currency pairs.

Iron Ore Prices and the Australian Dollar

At $118 billion a year, according to 2021 data, iron ore is Australia’s biggest export, with China the main destination. This makes its price an important potential driver of the Australian Dollar. Rising iron ore prices generally lift overall demand for the currency and, with it, the AUD’s value. Falling prices tend to have the reverse effect. Higher iron ore prices also make a positive Australian trade balance more likely, providing another source of support for the AUD.

Trade Balance Effects on the Australian Dollar

Another influence on the Australian Dollar is the trade balance: export earnings minus import expenditure. Strong overseas demand for Australian exports can lift the currency when demand from foreign buyers exceeds Australia’s spending on imports. A positive net trade balance therefore supports the AUD, while a negative balance has the opposite effect.