Recently, I was looking at the trend chart of the Australian dollar and realized what has actually happened to the AUD over the past decade. As the sixth-largest currency by global trading volume, the AUD was once considered a high-yield currency synonym. But if you look at it over a longer period, you'll notice that the AUD's peaks have indeed been getting lower and lower.

Starting from early 2013, when the AUD/USD exchange rate approached a high of nearly 1.05, over the past ten years, the AUD has depreciated by more than 35%, while the US dollar index has risen by 28.35% during the same period. The euro, yen, and Canadian dollar have also faced similar depreciation pressures, which indicates that the weakness of the AUD is largely due to the "US dollar being too strong." During that period, even when there were rebounds, the AUD found it difficult to stabilize at high levels.

However, from 2024 onwards, the situation has changed. With the rebound in commodity prices such as iron ore and gold, combined with rising market expectations of the Federal Reserve cutting interest rates, and the US dollar index retreating from high levels, the AUD has shown a clear rebound from its lows. By 2026, although the AUD is still far below the past high above 1.0, it has recovered significantly from the lows of 2022-2023.

But every time the AUD approaches previous high zones, market selling pressure clearly increases, indicating that confidence in the AUD remains limited. I believe there are several main reasons. First, the interest rate differential advantage is less obvious than in the past. Although the Reserve Bank of Australia (RBA) has raised its cash rate to around 4%, compared to the era of 2009-2011 when rates were significantly higher than the US dollar, its attractiveness has become more moderate. Second, the drag from the US dollar cycle persists; the US dollar index remains structurally strong, and the AUD is just one of the victims. Lastly, Australia's export structure is highly concentrated in iron ore, coal, and energy, and recent data from China has been less than expected, directly undermining the AUD's status as a commodity currency.

From a medium- to long-term perspective, the AUD now resembles a "rebound but lacking a clear trend" currency. Without strong growth momentum or interest rate advantage, the AUD's movement is more susceptible to external factors rather than driven by its fundamentals.

For the AUD to break out into a genuine medium- to long-term bull market, three conditions must be met simultaneously. First, the RBA needs to maintain a relatively hawkish stance to make the interest rate differential a highlight again. Second, there must be substantial improvement in Chinese demand, allowing prices of iron ore and other commodities to rise. Third, the US dollar must enter a structural weakening phase. If only one of these conditions is met, the AUD is more likely to remain in a range-bound oscillation rather than trend upward unilaterally.

Looking at forecasts from major institutions, Morgan Stanley is optimistic about the AUD's fundamentals, with a target price of up to 0.725. Goldman Sachs recently raised its forecast range for the next 3 to 12 months to 0.72–0.74. Deutsche Bank is even more optimistic about the end of 2026, expecting 0.76. The common basis for these optimistic forecasts is that if the US economy experiences a soft landing and the US dollar index declines, it will benefit commodity currencies like the AUD.

However, some institutions remain cautious. UBS expects the RBA may raise interest rates two more times, but economic slowdown will limit the upside potential of the AUD. The Commonwealth Bank of Australia warns that the interest rate differential poses significant downside risks, and the AUD may struggle to sustain high levels.

From my personal observation, the short-term pressure on the AUD mainly comes from RBA and Fed policies, with interest rate differentials being the key driver. The long-term bullish outlook depends on Australia's resource exports and the commodity cycle. Rather than trying to precisely predict the AUD's movement, a more practical approach is to treat the AUD/USD as a commodity currency oscillating within a range, focusing on entry and exit points at the boundaries and risk management.

As a commodity currency of a major resource-exporting country, the AUD's characteristic remains evident, especially its high correlation with raw materials like copper, iron ore, and coal. In the short term, the RBA's hawkish stance and strong commodity prices will provide support, but in the medium to long term, global economic uncertainties and potential rebounds in the US dollar will limit the upside and increase volatility. Due to its high liquidity, strong volatility patterns, and economic structure, the medium- to long-term trend judgment becomes relatively straightforward.