AUD/USD Price Forecast: Antipodeans face pressure as oil prices climb

0.7000 nears as AUD/USD slides. Rising oil prices put pressure on the Australian Dollar.
The risk of renewed Middle East escalation has increased following the withdrawal of US non-emergency personnel from the Gulf.
October’s preliminary PMI releases from Australia and the US are in sharp focus for investors.

A 0.4% fall puts the Australian Dollar near the psychological 0.7000 level against the US Dollar (USD). On Thursday, the currency trails all its major peers apart from the New Zealand Dollar (NZD).

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Australian Dollar: Today’s Performance

Today’s percentage moves in the Australian Dollar (AUD) against the major currencies listed appear in the table below. Its largest loss was against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.30%	0.23%	-0.85%	-0.03%	0.48%	0.55%	-0.32%
EUR	-0.30%		-0.08%	-1.14%	-0.34%	0.17%	0.24%	-0.65%
GBP	-0.23%	0.08%		-1.07%	-0.30%	0.24%	0.31%	-0.56%
JPY	0.85%	1.14%	1.07%		0.80%	1.33%	1.37%	0.51%
CAD	0.03%	0.34%	0.30%	-0.80%		0.52%	0.60%	-0.29%
AUD	-0.48%	-0.17%	-0.24%	-1.33%	-0.52%		0.06%	-0.80%
NZD	-0.55%	-0.24%	-0.31%	-1.37%	-0.60%	-0.06%		-0.84%
CHF	0.32%	0.65%	0.56%	-0.51%	0.29%	0.80%	0.84%

Percentage movements between major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. Selecting the Australian Dollar on the left and reading across to the US Dollar, for example, gives the percentage change for AUD (base)/USD (quote) in the corresponding cell.

Fears of renewed escalation in the Middle East have driven oil prices sharply higher, putting risk-sensitive currencies under pressure. WTI Oil stands near $99.00 at the time of writing, a gain of 1.5%.

According to analysts at Commerzbank, Middle East tensions “intensified after a drone attack on Saudi Arabia's Shaybah oil field killed two people and injured two others,” although the eventual impact on crude remained contained. The analysts say “oil prices briefly jumped on reports suggesting a wider withdrawal of US diplomatic personnel from the Gulf,” but the rally faded after “Washington clarified that the order was limited to Saudi Arabia,” leading the market to trim its earlier gains.

A rebound in the US Dollar Index (DXY) is adding to pressure on AUD/USD. During European trading, the index has recovered to around 101.66 after retesting a three-week low near 101.45. The US Dollar Index (DXY) measures the Greenback against six major currencies.

Friday’s October flash private-sector PMI releases from Australia and the United States (US) are expected to provide the next catalyst for the Australian Dollar and the US Dollar.

AUD/USD Technical Outlook

At 0.6996 on the daily chart, AUD/USD is sitting precisely on its 20-day exponential moving average (EMA), also near 0.6996. This makes the average a key pivot. Price fluctuations around this dynamic line leave the near-term bias neutral.

At 48, the Relative Strength Index (RSI) remains just under the 50 threshold, suggesting no clear directional momentum. Recent selling pressure has eased, but buyers have not yet re-established firm control.

Following a breakout from the Double Bottom formation, the pair remains pinned to its 20-day EMA. A sustained close above this pivot would give bulls scope to regain control and attempt a recovery towards earlier highs around 0.7036. Conversely, a break below the 15 October low of 0.6894 could start another leg lower in AUD/USD.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

US Dollar: Key Questions

What role does the US Dollar play?

As the official currency of the United States of America, the US Dollar (USD) also circulates alongside local banknotes as the ‘de facto’ currency in a significant number of other countries. No currency is traded more widely. Data from 2022 show that it accounts for over 88% of global foreign exchange turnover, equivalent to average daily transactions of $6.6 trillion. The USD replaced the British Pound as the world’s reserve currency after the Second World War. Gold backed the US Dollar for most of its history, until the Bretton Woods Agreement in 1971 brought the Gold Standard to an end.

How does Federal Reserve policy affect the US Dollar?

Monetary policy set by the Federal Reserve (Fed) is the single biggest influence on the US Dollar’s value. The Fed pursues two mandates: price stability, through inflation control, and full employment. Adjusting interest rates is its main means of meeting both objectives. Inflation above the Fed’s 2% target, with prices increasing too rapidly, prompts the central bank to raise interest rates, supporting the USD. By contrast, inflation below 2% or an excessively high Unemployment Rate may lead the Fed to cut rates, putting pressure on the Greenback.

Quantitative Easing: What does it mean for the US Dollar?

When conditions become extreme, the Federal Reserve can create more Dollars through quantitative easing (QE). This process sharply expands the supply of credit within a financial system that has become blocked. QE is an unconventional policy response to a credit shortage caused by banks refusing to lend to one another for fear of counterparty default. It serves as a last resort when interest-rate cuts alone are unlikely to deliver the required outcome. During the Great Financial Crisis in 2008, the Fed used it as its preferred tool to address the credit crunch. Under QE, the Fed prints additional Dollars to purchase US government bonds, mainly from financial institutions. The policy typically weakens the US Dollar.

Quantitative Tightening: What does it mean for the US Dollar?

The reverse of quantitative easing is quantitative tightening (QT). Under QT, the Federal Reserve ceases bond purchases from financial institutions and does not reinvest principal repaid on its maturing bond holdings in new purchases. This generally supports the US Dollar.