AUD/USD gained around a third of a percent on Wednesday, bouncing from the 0.6900 handle before fading back below 0.6950. The pair has been recovering from a two-month low close to 0.6830 reached last week, posting a series of higher lows on the four-hour chart, but remains well below the March highs near 0.7120.
On the Australian Dollar side, February building permits surprised sharply higher at 29.7% MoM against a 6.5% consensus, pointing to a pickup in housing activity. The Reserve Bank of Australia (RBA) raised the Official Cash Rate (OCR) to 4.10% in March, and markets are pricing roughly a 65% chance of another hike at the May meeting as inflation concerns tied to surging energy costs continue to build. Thursday’s trade balance release, with a 2,500M consensus, will offer a fresh read on export demand.
On the US Dollar side, Wednesday’s data leaned hawkish. ADP Employment Change beat at 62K against a 40K forecast, and retail sales rose 0.6% MoM, but the headline event was the Institute for Supply Management (ISM) Manufacturing Prices Paid component, which surged to 78.3 from 70.5, the highest reading since 2022. The ISM Purchasing Managers Index (PMI) itself edged up to 52.7, suggesting factory activity is expanding but at a high inflationary cost. St. Louis Federal Reserve (Fed) President Musalem noted rates are likely appropriate “for some time,” reinforcing the hold at 3.50% to 3.75%.
President Trump is set to address the nation Wednesday night on the war with Iran, with markets watching for any shift in the conflict timeline after he suggested US forces could leave within two to three weeks.
AUD/USD 4-hour chart
Technical Analysis
In the 4-hour chart, AUD/USD trades at 0.6929. The near-term bias is mildly bullish as price extends its recovery away from last week’s 0.6850–0.6845 area while holding above the recent swing low near 0.6875. The pair still trades well beneath the 200-period exponential moving average around 0.6990, so the broader 4-hour trend remains capped, but the short-term rebound is supported by improving momentum. Stochastic RSI has pushed into overbought territory above 80, signalling firm upside pressure in the immediate term, although this also warns of emerging fatigue after the latest leg higher.
Initial resistance is located at the recent high around 0.6954, with a sustained break opening the way toward the 0.6990 region where the 200-EMA aligns as the next key barrier. Above that, the 0.7020 area from earlier in the series would act as a stronger medium-term cap. On the downside, minor support emerges at 0.6900, ahead of Friday’s reaction low near 0.6875. A drop through 0.6875 would weaken the bullish bias and expose the 0.6850 area as the next significant support level.
(The technical analysis of this story was written with the help of an AI tool.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast 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, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if 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 of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
