Can the AUD/USD rally continue? Several institutions see a target of 0.71

Recently, AUD/USD has been moving quite strongly, rising 8.4% since the beginning of the year. This increase is considered “explosive” in the foreign exchange market. Deutsche Bank and National Australia Bank have both issued ambitious forecasts — by the end of 2026, the USD/AUD exchange rate could reach 0.71, which means the Australian dollar still has room for further appreciation.

Why did the AUD suddenly become so strong?

It’s simple — the central banks of Australia and the US have “taken different attitudes.”

On the Australian side, inflation rebound has raised concerns. The December meeting minutes revealed hawkish signals, and the market generally expects the Reserve Bank of Australia to raise interest rates by 2026. On the other hand, the Federal Reserve’s rate cut cycle is expected to continue, with two rate cuts anticipated in 2026. One may raise rates, while the other continues to cut — the interest rate differential widens, making the AUD naturally more valuable.

Another driving force is the “bull” in commodity markets. Gold, silver, copper, and other major commodities have been hitting new all-time highs recently. As a resource-exporting country, Australia directly benefits. The more fiercely commodity prices rise, the more the AUD appreciates — this is a positive feedback loop.

Don’t miss these key upcoming events

To judge whether the AUD’s strength can continue, focus on two key dates:

January 28 — Australia releases Q4 CPI data. This data directly affects the RBA’s inflation assessment and will influence rate hike expectations.

February 3 — The RBA announces its latest interest rate decision. This is the most direct signal, determining market perception of the RBA’s policy direction.

Once these two events occur, we can see whether the AUD will continue to appreciate or adjust. Currently, the USD/AUD rally has been quite substantial, and whether this strength can be maintained largely depends on the outcomes of these two “exams.”

Institutions are optimistic now, but market sentiment is most prone to reversal, and the real test is still ahead.