AUD/USD Price Forecast: Is a Double Bottom Forming as RSI Nears 50?

AUD/USD advances, with the Australian Dollar drawing support from US Dollar weakness and the RBA’s hawkish policy stance.
Buyers appear to be recovering ground as a possible double-bottom pattern takes shape.
Despite firmer momentum, key daily moving averages continue to sit above the pair.

AUD/USD’s recovery extends into a third consecutive day on Tuesday, with the pair edging up to around 0.7002 at the time of writing, close to one-week highs. Supporting the advance is a retreat in the US Dollar (USD) from last week’s 18-month highs, alongside sustained underlying demand for the Australian Dollar (AUD) as the Reserve Bank of Australia (RBA) maintains its hawkish stance.

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

A possible double bottom around 0.6900 points to a gradually improving technical outlook, with buyers returning after several weeks of selling pressure. The recovery nevertheless remains constrained, as AUD/USD continues to trade beneath key moving averages on the daily chart.

Selling pressure appears to have moderated, although buyers are not yet firmly in control. The Moving Average Convergence Divergence (MACD) is slightly positive, and the Relative Strength Index (RSI) has climbed out of oversold territory towards 49.

For the recovery to progress, the first resistance to clear is the 38.2% Fibonacci retracement at 0.7026. Beyond it lie the 100-day SMA at 0.7035 and the 200-day SMA at 0.7047. A more substantial barrier sits around the 50.0% retracement at 0.7067 and the 50-day SMA at 0.7077. Higher levels form a wider resistance band, comprising 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.

The 23.6% retracement at 0.6976 offers the nearest support on a decline. Should the pair slip below it, a retest of the 0.6895-0.6900 support area could follow, bringing the zone of the potential double bottom back into focus.

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

Australian Dollar: Key Questions Answered

Which factors shape movements in the Australian Dollar?

Risk appetite can influence the Australian Dollar (AUD): when investors favour riskier assets (risk-on), the currency typically benefits, while a preference for safe havens (risk-off) also shapes its performance. Among its most important drivers is the interest rate set by the Reserve Bank of Australia (RBA). Australia’s abundant natural resources mean that the price of iron ore, its largest export, is another major influence. Other factors include economic conditions in China, Australia’s biggest trading partner, as well as domestic inflation, economic growth and the trade balance.

Through which channels do Reserve Bank of Australia decisions affect the Australian Dollar?

By setting the interest rate at which Australian banks lend to one another, the Reserve Bank of Australia (RBA) influences borrowing costs across the economy and, in turn, the Australian Dollar (AUD). Its primary objective is to keep inflation stable at 2-3%, raising or lowering interest rates as needed. When rates are relatively high compared with those of other major central banks, the AUD receives support; relatively low rates have the reverse effect. Credit conditions can also be influenced through quantitative easing or tightening. Easing is negative for the AUD, whereas tightening is positive.

Why does China’s economic performance matter for the Australian Dollar?

The Australian Dollar (AUD) is particularly sensitive to China’s economic performance because China is Australia’s largest trading partner. A strong Chinese economy buys more Australian raw materials, goods and services, increasing demand for the AUD and lifting its value. When Chinese growth falls short of expectations, the reverse applies. As a result, both upside and downside surprises in Chinese growth figures often directly affect the Australian Dollar and its currency pairs.

Why do iron ore prices influence the Australian Dollar?

Changes in iron ore prices can move the Australian Dollar because the commodity is Australia’s biggest export. According to 2021 data, it accounts for $118 billion a year, with China the main destination. Rising iron ore prices generally lift the AUD as overall demand for the currency increases, while falling prices have the reverse effect. Higher prices also make a positive Australian trade balance more likely, providing another source of support for the AUD.

Why is the trade balance important for the Australian Dollar?

Another influence on the Australian Dollar is the trade balance, or the difference between a country’s export earnings and its import payments. Strong overseas demand for Australian exports can lift the currency’s value when purchases by foreign buyers generate more demand than is offset by Australia’s spending on imports. A positive net trade balance therefore supports the AUD, while a negative balance has the opposite effect.