The USD/AUD pair is currently bearish-to-range-bound, positioned below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Federal Reserve may cut rates in 2026, while the Reserve Bank of Australia is signaling potential rate hikes due to rising inflation risks, widening the gap between the two currencies.
- Risk/commodities: Weaker Chinese inflation figures have raised concerns about demand for Australian exports, particularly in commodities, which is pressuring the Aussie dollar.
- One macro factor: Upcoming Australian economic data releases, including CPI and the labour force report, will be critical for determining AUD strength.
Range: The USD/AUD is expected to drift within the recent range as both currencies react to upcoming data and geopolitical events.
What could change it:
- Upside risk: A stronger than expected Australian economic report could support the AUD.
- Downside risk: If Federal Reserve officials signal a more aggressive rate stance, it could bolster the USD further.