## The Deep Logic Behind the Australian Dollar's Continued Pressure—Is a Rebound Truly Possible?

As the fifth most traded currency globally, the Australian dollar (AUD) ranks just behind the US dollar, euro, yen, and pound in trading activity. Known for **high liquidity and low spreads**, it is a popular choice for many investors engaging in short-term trading or medium-term positioning. However, despite its past reputation as a "high-yield currency," why has the AUD largely underperformed over the past decade?

## The Fate of Commodity Currencies: Why Is the AUD's Outlook So Pessimistic?

The AUD's unique identity determines its distinctive movement. As a typical **commodity currency**, Australia's economy heavily depends on exports of iron ore, coal, copper, and other bulk commodities. This means that any fluctuation in global raw material prices is immediately reflected in the AUD exchange rate, often causing volatility exceeding that of other major currencies.

From a data perspective, the past ten years have been disappointing for the AUD. Starting from a baseline of 1.05 in early 2013, by the end of 2023, the AUD/USD has depreciated by over 35%, while the US dollar index (DXY) has risen by 28.35%. Comparing with the euro, yen, and Canadian dollar, which also show depreciation against the dollar, this reflects a **broad-based strong dollar cycle** rather than an issue unique to the AUD.

Entering Q4 2024, the AUD/USD has accelerated its decline, with an annual drop of about 9.2%. In early 2025, amid global trade tensions and recession fears, the AUD/USD briefly fell to 0.5933, hitting a five-year low. Key factors include: rising trade protectionism weakening demand for Australia's main exports, the inability of the Australian-US interest rate differential to narrow, and domestic economic sluggishness leading to ongoing capital outflows.

## The Rebound Has Begun—Three Major Support Factors to Watch

Surprisingly, after a panic-driven fall in spring, the AUD began a slow recovery toward late summer and early autumn. Particularly in September, boosted by **sharp rises in iron ore and gold prices**, along with market expectations of Fed rate cuts, the AUD/USD surged to 0.6636, reaching a new high since November 2024. Although it subsequently retreated somewhat, it remained above 0.64, showing resilience.

So, can the AUD continue to rebound? The answer depends on three key variables:

**First, the RBA's Policy Stance**
The Reserve Bank of Australia (RBA) maintained its benchmark rate at 3.6% in November. Data shows that the Consumer Price Index (CPI) in Q3 rose by 1.3% month-over-month, exceeding the previous quarter's 0.7% and surpassing market expectations. The RBA repeatedly emphasized that inflation pressures from housing construction and services sectors remain difficult to control. Until inflation enters a sustainable downward trajectory, the RBA will not rush to ease policy. This cautious stance effectively supports the AUD—when the Fed is actively cutting rates, the AUD appears more attractive in comparison.

**Second, the Battle of Dollar Strength**
The Fed announced a 25 basis point rate cut to a 3.75%-4.00% range in October, but subsequent statements from Chair Powell dampened expectations for further cuts. Notably, the US dollar index (DXY) rebounded from a low near 96 in summer, showing unexpected resilience, now up about 3%, with the possibility of breaking the psychological 100 level increasing daily. The AUD and USD often move inversely; a strengthening dollar will inevitably weigh on the AUD.

**Third, the Speed of China's Economic Recovery**
Australia's resource exports are directly linked to China's demand. When China's economy is strong, imports of iron ore, coal, natural gas, and other raw materials increase, providing solid support for the AUD. Conversely, if China's recovery stalls or the property sector continues to decline, long-term demand for Australian raw materials will weaken, causing the AUD to lose a vital support and potentially enter a downturn.

## What Do Institutions Think? Divergent Views

Major Wall Street institutions have differing forecasts for the AUD. Morgan Stanley is relatively optimistic, expecting the AUD/USD to rise to 0.72 by year-end, citing the RBA's likely hawkish stance and commodity price support. UBS is more conservative, suggesting that global trade uncertainties and Fed policy shifts could limit gains, with a forecast around 0.68. The Commonwealth Bank of Australia’s economists are the most cautious, believing the AUD's rebound may be fleeting, with a peak possibly in March 2026, followed by a decline as US economic growth eventually surpasses other major economies, restoring dollar dominance.

## AUD/USD: The Tug-of-War in the 0.63-0.66 Range

Based on technical and fundamental analysis, the short-term outlook for AUD/USD is expected to fluctuate within **0.63-0.66**. The resistance level is around 0.6450; if it holds above this, the pair could target the 200-day moving average at 0.6464 and the psychological 0.6500. Support levels are near 0.6373 and 0.6336.

Key factors influencing volatility include: RBA policy signals, US GDP and non-farm payroll data, Australian CPI figures, global trade tensions easing or intensifying, commodity price trends, and progress in China-US trade negotiations.

Regarding AUD/CNY, given the relatively stable RMB, expect fluctuations within **4.6-4.75**. If RMB weakens due to domestic or external factors, it could briefly dip toward 4.8. AUD/MYR may trade within **3.0-3.15**.

## Practical Trading Recommendations

**Short-term (1-3 days):** Focus on range trading, with key levels at 0.6370-0.6450. A break above resistance requires monitoring US economic data for signs of weakness or a slowdown in inflation; a break below support warrants caution if US data remains strong or geopolitical risks escalate. Reduce positions before major data releases and manage risk exposure carefully.

**Medium-term (1-3 weeks):** Watch whether the Fed initiates a new rate-cut cycle and if trade tensions ease. If US employment weakens and inflation falls, the AUD could rebound to 0.6550-0.6600. Conversely, if US resilience exceeds expectations, the AUD may test 0.6250.

**Long-term Holding:** Investors optimistic about the AUD can gradually build positions at lows, using time to absorb market volatility. Once a clear medium-term uptrend is confirmed, consider increasing holdings accordingly.

## Final Words

The AUD/USD is currently in a phase of technical consolidation and fundamental tug-of-war. Short-term volatility is normal; the key is to seize breakout opportunities. The long-term trend ultimately depends on the clarity of Fed policy shifts and whether global trade and economic conditions significantly ease. Traders should stay sensitive to key economic data, adjust positions flexibly based on market sentiment, and always set stop-losses to control risk. While the AUD faces challenges, for those who understand its commodity currency nature, monitor macro policies, and master technical support levels, there remain valuable opportunities to explore.