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AUD/USD Price Forecast: Antipodeans Weaken as Oil Prices Rise
- Higher oil prices put pressure on the Australian Dollar, sending AUD/USD down towards 0.7000.
- The US withdrawal of non-emergency personnel from the Gulf has raised the risk of a renewed escalation in Middle East tensions.
- October’s preliminary PMI readings from Australia and the US are keenly awaited by investors.
A 0.4% decline against the US Dollar (USD) leaves the Australian Dollar near the psychological 0.7000 level on Thursday. The currency is also lagging its other major peers, with the exception of the New Zealand Dollar (NZD).
Australian Dollar Lags Most Major Peers Today
Today’s percentage moves in the Australian Dollar (AUD) against the major currencies listed are set out 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 the 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 following its row across to the US Dollar, for instance, gives the percentage change for AUD (base)/USD (quote) in the corresponding cell.
WTI Oil is trading around $99.00, up 1.5% at the time of writing. The surge in oil prices, driven by concerns over a renewed escalation in Middle East tensions, has weighed on currencies perceived as riskier.
According to Commerzbank analysts, 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 effect on crude prices was limited. The analysts point out that “oil prices briefly jumped on reports suggesting a wider withdrawal of US diplomatic personnel from the Gulf,” but those gains subsequently faded. As “Washington clarified that the order was limited to Saudi Arabia,” the market pared its earlier advance.
Adding to the pressure on AUD/USD is a rebound in the US Dollar Index (DXY). During European trading, the index, which measures the Greenback against six major currencies, has recovered to around 101.66 after returning to a three-week low near 101.45.
Friday’s release of the October flash private-sector PMI readings for Australia and the United States (US) is expected to provide the next catalyst for both the Australian Dollar and the US Dollar.
AUD/USD Holds at a Key Technical Pivot
At 0.6996 on the daily chart, AUD/USD is trading precisely at its 20-day exponential moving average (EMA), also near 0.6996. This makes the average a key pivot: while the pair fluctuates around this dynamic level, its short-term bias remains neutral.
At 48, the Relative Strength Index (RSI) sits just beneath the 50 threshold, suggesting no clear directional momentum. Recent selling pressure has eased, but buyers have yet to establish firm control.
With a Double Bottom breakout having materialised and the price holding at the 20-day EMA, a sustained close above this pivot would give bulls scope to regain control and pursue a recovery towards previous highs around 0.7036. Conversely, a break below the 15 October low of 0.6894 could set AUD/USD on a fresh downward leg.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar: Key Facts and Policy Drivers
As well as being the official currency of the United States of America, the US Dollar (USD) serves as the ‘de facto’ currency in a significant number of other countries, circulating alongside their local banknotes. Data from 2022 show that it is the world’s most traded currency, representing over 88% of global foreign exchange turnover, equivalent to an average of $6.6 trillion in daily transactions. 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 an end to the Gold Standard.
Monetary policy, set by the Federal Reserve (Fed), is the single biggest influence on the US Dollar’s value. The Fed’s dual mandate is to maintain price stability by controlling inflation and to promote full employment. Adjusting interest rates is its principal means of pursuing these objectives. If prices rise too rapidly and inflation exceeds the Fed’s 2% target, the central bank will increase rates, supporting the USD. By contrast, inflation below 2% or an excessively high unemployment rate may prompt the Fed to cut rates, putting pressure on the Greenback.
The Federal Reserve can resort to printing additional Dollars and implementing quantitative easing (QE) in extreme circumstances. Through QE, the Fed sharply expands the supply of credit within a financial system that has become blocked. This unconventional policy is used when lending has dried up because banks fear counterparty defaults and are unwilling to lend to one another. It is a last resort when interest-rate cuts alone are unlikely to deliver the required outcome. During the Great Financial Crisis in 2008, QE was the Fed’s preferred response to the credit crunch. The process entails printing additional Dollars to purchase US government bonds, mainly from financial institutions. The US Dollar typically weakens as a result of QE.
In the reverse process, known as quantitative tightening (QT), the Federal Reserve ceases buying bonds from financial institutions. It also refrains from reinvesting the principal repaid as its existing bond holdings mature into further purchases. This generally supports the US Dollar.
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