Although the US dollar is supported by oil prices, the AUD/USD pair is taking advantage of every opportunity to grow. The Australian dollar remains the most effective currency on Forex thanks to the RBA, attractive Australian assets, and China. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Markets are 70% confident that the cash rate will rise in March.
- The Australian dollar is benefiting from Australia’s status as a net oil exporter.
- China has secured protection against oil shocks.
- Long positions on the AUD/USD pair can be opened with targets of 0.745 and 0.76.
Monthly Fundamental Forecast for Australian Dollar
The conflict in the Middle East has rattled the Forex market. The Australian dollar, which usually suffers from market turmoil, is now perceived as almost a safe haven. The Australian economy is robust, and the RBA is set to raise its key interest rate for the second time in a row, a move that has not occurred since May-June 2023. Furthermore, the country’s status as a net energy exporter makes AUD/USD quotes less vulnerable to oil price spikes.
Three of Australia’s “Big Four” banks, NAB, Westpac, and CBA, have joined UBS and Deutsche Bank in expecting a 25 bp cash rate hike to 4.1% at the March 17 meeting. Analysts believe that due to overly rapid economic growth and the risk of rising inflation expectations, the Australian central bank is likely to aggressively tighten its policy.
Moreover, Deputy Governor Andrew Hauser said that the conflict in the Middle East would not affect the central bank’s outlook. After his speech, the odds of a monetary policy tightening in March increased from 33% to 70%.
Market Expectations for RBA Cash Rate
Source: Bloomberg.
With the RBA raising interest rates amid a Fed pause, the spread between Australian and US bonds has widened to its highest level since October 2022. Against this backdrop, investors are flocking to Australia from the US, setting the stage for a robust rally in AUD/USD quotes.
AUD/USD Rate and US-Australia Bond Yield Spread
Source: Bloomberg.
The RBA’s monetary tightening and the increased appeal of Australian assets compared to their US counterparts are not the only factors behind the strengthening of the Australian dollar. China, Australia’s major trading partner, has shown remarkable resilience in the face of economic headwinds.
Between January and February, China’s exports jumped by 21.8%, despite US tariffs. Following a record trade surplus of $1.2 trillion in 2025, this figure continues to grow. As a result, China’s bond yields are stabilizing, the yuan is maintaining its value against the US dollar, and stock indices remain relatively buoyant. This seems counterintuitive for an oil-importing country. However, it is indeed the case.
The reasons for this can be found in how China has insulated its economy from global oil price shocks. These efforts include investing in renewable energy sources, dominating clean energy supply chains, and promoting electric vehicles in the domestic market. As a result, China has become less dependent on oil.
Monthly AUDUSD Trading Plan
The AUD/USD pair’s road to 0.745 and 0.76 will likely be bumpy. However, the pair is expected to eventually reach its targets. In this connection, long positions can be opened on pullbacks.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of AUDUSD in real time mode
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