AUD/USD
2025 performance overview
As we approach the end of 2025, AUD/USD is trading at 0.6640 – a 7.31% increase calendar year-to-date (CYTD) – and is set to break a four-year losing streak. Its impressive performance comes as USD, as measured by DXY, declined by 9.06% during the same timeframe.
The Australian dollar’s (AUD) ascent and the greenback’s decline can be attributed to several key factors. Firm commodity prices have played a role, notably the strong performance of iron ore, copper and gold, which has supported the commodity-dependent currency and Australian economy.
More importantly, however, Reserve Bank of Australia’s (RBA) 75 bp of rate cuts from a peak of 4.35% to 3.60% this year was shallower than market anticipated. This was primarily due to rising inflation, resilient economic growth, employment and spending data.
Finally, the dramatic improvement in risk sentiment that followed Liberation Day tariff lows in early April allowed AUD/USD, which is an integral part of the risk complex, to make a V-shaped recovery from its 9 April low of 0.5912.
2026 outlook
Looking ahead to 2026, AUD/USD is expected to continue reflecting interplay between a potentially weaker US dollar and stable Australian economic performance.
A bearish dollar bias is expected to prevail in first half (H1) of 2026, primarily influenced by Fed ongoing concerns regarding labour market softness and potential for further monetary easing.
Against this backdrop, AUD is expected to receive support from a number of factors, including:
- Continued commodity support
Australian economy’s strong reliance on commodity exports positions it well to benefit from sustained global demand for key resources such as iron ore, coal and agricultural goods. Furthermore, new narratives surrounding copper, rare earths and gold provide valuable diversification for Australia’s commodity sector and support for AUD.
- Pro-cyclical growth environment
Upgraded global gross domestic product (GDP) forecasts and a broader push for economic growth should enhance overall risk sentiment. This environment typically makes higher-yielding currencies, such as AUD, more attractive relative to USD.
- Supportive interest rate differentials
As monetary policies evolve in Australia and US, interest rate differentials between two countries are expected to shift in favour of AUD. This is best illustrated by rates market pricing in Fed Funds rate falling another 50 bp into a range of 3.00 – 3.25% by end of 2026, while rates market sees RBA’s official cash rate ending 2026 just above 4.00%.
- Foreign exchange hedge ratios
Australian superannuation funds have begun lifting their foreign exchange (FX) hedge ratios, effectively reducing a perennial structural headwind for AUD.
In conclusion, while risks remain – including potential geopolitical tensions and unexpected shifts in monetary policy – prevailing conditions favour a continued recovery for AUD towards 0.6940 – 0.6950 by mid-2026.
Technical analysis
As can be viewed on weekly chart below, AUD/USD has recently broken above multi-month downtrend resistance originating from February 2021 high of 0.8007, which corresponds to 0.6600 level.
It is currently tackling its next upside challenge – 200-week moving average (MA) at 0.6643. A weekly close above here would allow pair to retest 0.6706 high from mid-September, then follow 0.6940 – 0.6950 level from September 2024.
AUD/USD weekly candlestick chart
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