AUD/USD is closely related to Australia's position as a major exporter of key commodities such as iron ore, coal, and gold. With the rise in commodity prices, Australia's export revenue has increased, economic growth has improved, and AUD/USD has strengthened. This dynamic not only reflects the strong nature of Australia's commodity driven economy, but also highlights how global market conditions and investor sentiment are driving significant fluctuations in AUD/USD. This article discusses recent market dynamics that may affect the short-term, medium-term, and long-term trends of AUD/USD.

Economic uncertainty of the Australian dollar against the US dollar

The monthly chart of this currency pair highlights significant fluctuations over the past two decades and emphasizes the economic uncertainty that affects the price dynamics of the currency pair. It is worth noting that the Australian dollar/US dollar experienced a significant decline during the 2008 financial crisis, while the commodity market also experienced a downturn. But with the recovery of the commodity market after the crisis, the Australian dollar rebounded strongly against the US dollar.

Similarly, from 2014 to 2016, the decline in commodity prices and the economic slowdown in major Asian countries led to a further decline in the Australian dollar against the US dollar. The impact of the epidemic has also affected the global market, causing the Australian dollar to fall against the US dollar. However, as the commodity market recovered from the initial impact of the pandemic, the Australian dollar surged sharply against the US dollar.

Starting from the high of $0.801 in February 2021, the market is forming a downward wedge pattern. This descending wedge is a bullish pattern, indicating that the currency pair may form a bullish price trend during this consolidation. The rebound in August 2024 is approaching a descending wedge line, indicating that breaking through this line could trigger a strong surge in the currency pair and push up the price of the Australian dollar against the US dollar.

This is particularly important as there is a major geopolitical crisis in 2024, spreading from the Middle East to the world and having a positive impact on commodity markets. The impact of geopolitical crises on commodity markets may have a positive effect on the Australian dollar against the US dollar.

According to data from the Australian government's Department of Industry, Science and Resources, the recent outlook for Australian resource and energy commodity exports has slightly improved, indicating that the Australian dollar may strengthen. With the moderate recovery of economic activity in major economies and the push of loose monetary policies in Western economies, the prospect of improved global economic growth in 2025 further supports this positive outlook.

Although Australia's resource and energy exports are expected to decline from $466 billion in 2022-23 to $417 billion in 2023-24, and even lower in the coming years, the stabilization of key commodity prices such as iron ore and the rebound of nickel and lithium prices indicate that the decline has bottomed out. With gold prices hitting new highs and support measures from major Asian governments, Australia's export driven economy is well suited for a rebound. Due to the expected appreciation of the Australian dollar against the US dollar, the combination of these factors indicates the resilience of the Australian dollar in the face of global challenges.

Recent market developments

Recent news surrounding the Australian dollar suggests that its winning streak against the US dollar may continue. The minutes of the August meeting released by the Reserve Bank of Australia show that cash rates will remain stable for a long time, which has provided support for the Australian dollar. The decision of the central bank to maintain interest rates reflects a cautious attitude towards balancing economic risks, which has been welcomed by the market. This cautious optimism towards central bank policies may further strengthen the Australian dollar, especially as investors interpret the central bank's stance as supporting the current growth trajectory of the Australian economy.

In addition, the status of the Australian dollar is also influenced by external factors, especially the development of Australia's largest trading partner country. The central banks of major Asian countries maintain unchanged loan preferential interest rates, indicating economic stabilization. Due to the close trade relationship between the Australian economy and the country, any positive signal from the country often boosts the Australian dollar. The decision of the central bank not to adjust interest rates has reassured the market that the country's economic policy remains supportive, which indirectly benefits the Australian dollar. Therefore, the stable outlook of the country and the decision of the Reserve Bank of Australia may lead to sustained upward pressure on the Australian dollar against the US dollar.

On the other hand, due to recent hints from Federal Reserve officials that interest rates may be cut in the near future, the US dollar is facing downward pressure. The mild tone of the Federal Reserve contrasts sharply with the hawkish sentiment of the Reserve Bank of Australia, further widening the interest rate differential and benefiting the Australian dollar.

Therefore, investors may find the Australian dollar more attractive, leading to increased demand and further appreciation of the Australian dollar against the US dollar. In addition, the market will closely monitor the upcoming data and Federal Reserve Chairman Powell's speech at Jackson Hole, as any confirmation of a weakening of US monetary policy could further weaken the US dollar and boost the Australian dollar.

From a technical perspective, the US dollar index is attempting to break through the strong support level of the triangular pattern, which may trigger a sharp decline in the US dollar and boost the AUD/USD. But this is a strong support area.

The final idea

The geopolitical crisis in 2024 is expected to benefit the Australian dollar/US dollar as it has a positive impact on commodity prices, which are an important driving force for the Australian economy. As global tensions intensify, especially in regions affecting energy and raw materials, commodity prices often soar due to supply concerns and increased demand for safer assets such as gold and other Australian export products.

This dynamic has strengthened the Australian dollar, making it more attractive to investors. In addition, this crisis may lead to funds shifting from high-risk assets to safe assets, which could actually boost the Australian dollar if the Australian economy remains stable and the central bank maintains a hawkish stance. As 2024 progresses, these factors may push up AUD/USD.

In addition, the stable monetary policy of the Reserve Bank of Australia and the potential weakness of the US dollar are also favorable for the outlook of the Australian dollar. Technical indicators also show that with the formation of a bullish pattern and the stabilization of key support levels, the foundation for further upward movement is very solid. As global markets react to these developments, the Australian dollar/US dollar may experience significant upward momentum, making it an attractive option for investors looking to capitalize on these dynamics in 2024. Investors can buy AUD/USD at any price drop

AUD/USD daily chart