Recently, I've been analyzing the trend of the Australian dollar and noticed an interesting phenomenon. Although the AUD/USD has rebounded somewhat driven by rising commodity prices and a weakening US dollar, overall it still seems somewhat weak. I want to share my observations.

The reasons for the AUD's decline are actually quite complex. Looking over a longer period, the Australian dollar has been relatively weak over the past ten years, dropping from 1.05 in early 2013 to now, depreciating over 35%. During the same period, the US dollar index has increased by more than 28%, indicating that the entire market has entered a strong dollar cycle, with the AUD passively under pressure. Plus, US tariffs affecting global trade and a decline in raw material exports have also reduced the appeal of the AUD as a commodity currency.

The interest rate differential advantage is also diminishing. The Reserve Bank of Australia's cash rate is about 3.6%, and although the market expects another rate hike by 2026, the interest rate gap with the US is no longer as obvious as before. Australia's domestic economy isn't strong enough, and asset attractiveness is relatively low, which also undermines the AUD's support.

However, from another perspective, the AUD isn't completely without opportunities. The recent rebound to over 0.66 still has short-term room for recovery. The key is whether China's demand can truly improve, because Australia's export structure is highly dependent on iron ore and energy, and the health of China's economy directly influences the AUD's movement.

Major institutions' forecasts vary quite a bit. Morgan Stanley is more optimistic, expecting it could rise to 0.72; UBS is more conservative, thinking it might stay around 0.68. I personally lean toward the probability of the AUD fluctuating between 0.68 and 0.70 in the short term, affected by China's data volatility, but since Australia's fundamentals are still relatively stable, a major collapse seems unlikely.

In simple terms, the AUD now is more like "a rebound without a clear trend." To truly strengthen, three conditions need to be met simultaneously: the RBA continuing to be hawkish, a substantial improvement in China's economy, and the US dollar entering a weakening phase. Achieving all three is quite challenging. For now, it's just an observation, watching how the data develops.