Recently, I've been watching the trend of the Australian dollar, and it's quite interesting. As the fifth-largest trading currency in the world, the AUD has always been a focus for many traders. Its high liquidity and low spreads make short-term and medium-to-long-term positioning very convenient. However, the performance of the AUD in recent years has not been very ideal.

Speaking of why the AUD has been weakening, the key reason is its nature as a commodity currency. Australia's economy is highly dependent on exports of bulk commodities like iron ore, coal, and copper. When global raw material prices fluctuate, the AUD exchange rate also changes dramatically. From early 2013 to 2023, the AUD/USD has depreciated by over 35%, while the US dollar index increased by more than 28% during the same period. This indicates that not only is the AUD weakening, but other major currencies against the dollar are also depreciating, reflecting a strong dollar cycle overall.

In the fourth quarter of 2024, the AUD fell sharply, with an annual decline of about 9.2%. Entering 2025, influenced by the escalation of global trade tensions, the AUD once dropped to 0.5933, hitting a five-year low. Analysts believe the main reason is that US tariffs have impacted global trade, leading to a decline in raw material exports, which in turn damages the commodity currency status of the AUD.

However, starting from the second half of 2025, some changes began to emerge. Iron ore and gold prices surged significantly, and the Federal Reserve also started to cut interest rates, giving the AUD some breathing room. By September, the AUD/USD rose to 0.6636, reaching a new high since November 2024. This rebound has renewed optimism about the AUD.

So, will the AUD continue to rise? I think it depends on several key factors. The first is the policy direction of the Reserve Bank of Australia (RBA). In Q3 2025, Australia's CPI increased by 1.3% month-on-month, exceeding market expectations. The RBA repeatedly emphasized that they need to see inflation enter a sustainable downward trajectory before considering further easing. This suggests that in the short term, the AUD might find support and be more attractive compared to currencies that are about to cut rates.

The second factor is the trend of the US dollar. Although the Fed is cutting rates, signals from the chair suggest that the rate cuts won't accelerate quickly. The US dollar index has rebounded about 3% from its summer low of 96 and may break through the psychological level of 100. When the dollar strengthens, the AUD usually moves inversely, so the dollar's strength or weakness will directly influence the AUD's performance.

The third important factor is China's economy. Australia's resource exports heavily depend on China. The health of China's economy directly determines the demand for Australian iron ore, coal, and other raw materials. If China's economic recovery slows down, especially if the real estate sector remains sluggish, the AUD will lose an important support.

Major financial institutions have differing forecasts for the AUD. Morgan Stanley is more optimistic, expecting the AUD to rise to 0.72 by the end of the year. UBS is more conservative, expecting it to stay around 0.68. Some institutions believe the recent rebound may be short-lived, expecting the AUD to peak around March 2026 and then decline again.

From a technical perspective, the AUD/USD currently fluctuates between 0.63 and 0.66. If inflation data continues to be favorable and the economy remains stable, it might test above 0.66. Conversely, if global risk sentiment worsens or the dollar rebounds, the AUD could fall back to 0.63 or lower.

Regarding AUD/CNY, since the RMB remains relatively stable, the short-term outlook is for oscillation between 4.6 and 4.75. If the RMB weakens due to domestic economic pressures, the AUD/CNY might temporarily rise toward 4.8.

In summary, the AUD is currently in a phase of technical oscillation and fundamental game. In the short term, it’s advisable to trade within a range and follow the breakout. The medium- to long-term direction mainly depends on the Fed’s policy signals and whether global trade risks ease. If upcoming data reinforce expectations of rate cuts, consider positioning for a long. Conversely, be cautious of the pressure from a potential dollar rebound.

It’s worth noting that the AUD exchange rate can be quite volatile. To profit from it, close attention must be paid to various economic data and policy developments, and strategies should be adjusted flexibly. All investments involve risks, and forex trading is especially high-risk. Investors need to practice proper risk management and avoid blindly following the trend.