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The Australian dollar is strengthening as shifting commodity prices, central bank signals, and geopolitical tensions shape market sentiment. While momentum is building, uncertainty around trade and policy keeps traders alert to both opportunities and risks.
Shifting sentiment lifts the Aussie dollar
The Australian dollar has found fresh momentum, largely thanks to a surge in key commodity prices. Gold is hovering close to record levels, supported by safe-haven demand in response to global uncertainty and growing speculation that the Federal Reserve may soon deliver rate cuts.
At the same time, oil prices have firmed on renewed geopolitical risks in the Middle East, while iron ore has gained as Chinese steel producers resumed operations after maintenance downtime.
These commodity tailwinds matter greatly for Australia, where resource exports underpin much of the economy. Rising commodity values improve the nation’s terms of trade and typically translate into stronger demand for the Aussie dollar.
In terms of monetary policy, markets currently assign an 86% probability of a Reserve Bank of Australia (RBA) rate cut in November, while no change is expected at the September meeting.
Although inflationary pressures have eased modestly, the central bank remains guarded amid ongoing global uncertainty.
Adding to the cautious mood, geopolitical frictions continue to cloud risk appetite. Reports suggest US President Trump has pressed the EU to impose 100% tariffs on imports from China and India, escalating trade tensions.
Similar moves by Washington could dampen risk-sensitive currencies such as the AUD.
Technical analysis
AUD/USD is currently trading at 0.6597, up +0.20%, and edging back toward the 0.6625 resistance area last tested in August.
Since bottoming at 0.5921 in April, the pair has been on a steady upward trajectory, forming higher lows and maintaining a gradually bullish structure.
Short-term momentum remains constructive, with the 5, 10, and 30-day moving averages trending positively and price holding above the shorter-term averages.
Picture: AUD/USD trading near 0.66, holding above key support as seen on the VT Markets app.
The MACD indicator continues to signal bullish momentum, reinforcing the current upside bias.
A decisive break above 0.6625 could open the path toward 0.6700 in the near term.
On the downside, immediate support lies at 0.6500, with stronger support positioned near 0.6400. As long as the pair holds above these levels, the outlook remains tilted to the upside.
Cautious forecast
Despite its resilience and constructive technical picture, AUD/USD remains vulnerable to external shocks.
A failure to break through the 0.6625 ceiling could spark a near-term retracement back toward the 0.6500 support area.
The broader outlook hinges on global risk sentiment. Any escalation in trade disputes or a slowdown in Chinese demand could limit upside potential.
Conversely, with the RBA expected to keep rates steady this month and the Federal Reserve leaning toward cuts, any hawkish shift from the RBA or dovish signals from the Fed could widen yield differentials in favour of the AUD.
For now, traders may look for a potential breakout above 0.6625, but should remain alert to volatility stemming from geopolitical and macroeconomic developments.
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