Recently observing the trend of the Australian dollar, I found an interesting phenomenon. As the fifth most traded currency globally, the AUD has high liquidity and low spreads, making it a favorite among investors, yet over the past decade, the AUD exchange rate has been weakening. Starting from around 1.05 in early 2013, the AUD/USD has depreciated by over 35% in just ten years, reflecting a comprehensive strong dollar cycle behind it.

Why has the AUD fallen into this predicament? Essentially, it’s due to several key factors acting simultaneously. First, Australia’s economy is highly dependent on commodity exports, especially iron ore, coal, and energy. When demand from China is weak, prices for these commodities tend to fall, naturally putting pressure on the AUD as a commodity currency. Second, the interest rate advantage between the US and Australia is shrinking. The AUD was once considered a high-yield currency attracting a lot of hot money, but with US interest rates remaining high, that interest advantage has diminished significantly. Third, global trade uncertainties have increased, and fluctuations in US tariff policies have hurt raw material exports, further weakening the AUD’s status as a commodity currency.

However, since the second half of 2025, some changes have emerged. Iron ore and gold prices surged significantly, and the Federal Reserve began cutting interest rates, prompting funds to flow into risk assets. The AUD/USD once rose to 0.6636, appreciating about 5-7% overall. But can this rebound continue? Honestly, looking at the historical lows of the AUD exchange rate, the current rally is still far from enough.

To determine whether the AUD can truly break into a strong bullish trend in the future, I believe three key factors must be satisfied simultaneously. First, the Reserve Bank of Australia (RBA) needs to maintain a hawkish stance. Currently, the RBA’s cash rate is about 3.60%, and market expectations suggest another rate hike in 2026, which would help rebuild the interest rate advantage. Second, China’s economy must see real improvement. Since Australia relies heavily on Chinese demand, a rebound in infrastructure and manufacturing activity in China would boost iron ore prices, and the AUD would quickly reflect this in the exchange rate. Third, the US dollar needs to enter a structural weakening phase. In a rate-cut environment, a weakening dollar generally benefits risk currencies like the AUD.

Currently, market views on the AUD outlook are divided. Morgan Stanley is more optimistic, expecting the AUD to rise to 0.72, mainly based on the possibility of the RBA maintaining a hawkish stance and commodity prices strengthening. Conversely, UBS is more cautious, citing ongoing high global trade uncertainties and predicting the exchange rate will stay around 0.68 by the end of the year. CBA economists even warn that the AUD’s recovery might be short-lived, with a peak forecasted around March 2026, after which it could decline again.

My personal view is that in the first half of 2026, the AUD is likely to fluctuate between 0.68 and 0.70. In the short term, Chinese data and US non-farm payroll reports will cause volatility, but Australia’s fundamentals are relatively stable, and the RBA’s hawkish stance suggests the AUD is unlikely to collapse sharply. However, considering the ongoing structural advantage of the dollar, the AUD probably won’t surge above 0.80 easily. Short-term pressures mainly stem from Chinese data, while long-term positives include the recovery of Australia’s resource exports and commodity cycles.

If you’re interested in the AUD trend, AUD/USD, as one of the top five most traded forex pairs worldwide, offers high liquidity and relatively clear volatility patterns, making it suitable for medium- to long-term trend analysis. Investors can participate through forex trading, using two-way operations and flexible risk management tools to find opportunities in different market environments. Of course, all investments carry risks; forex trading is high-risk, so it’s essential to carefully assess your risk tolerance.