AUDUSD has been trending down since the 2011 peak above 1.10. Since then, it has fallen by more than 50 percent at its lowest point and is currently down 40.36 percent. Recently, the dollar has been weakening, and long-term dynamics are starting to signal major shifts in the global economy and markets. AUDUSD appears to be one of the pairs reflecting this change, pushing against a 14-year-long trend. 

In this article, we will take a deep dive into AUDUSD dynamics, both fundamental and technical, to assess its potential over the medium to long term. 

(GDP and Inflation Forecasts) 

Tariff hikes have changed the global outlook for at least the next couple of years. The US is now facing slower growth and higher inflation risks, reflected in the 2026 forecasts. US GDP is expected to grow by 1.70 percent, while inflation is projected to stay above target at 2.83 percent in 2026. 

A stagflationary environment is usually negative for a currency. If the Fed prioritizes inflation, money supply will tighten but money demand will weaken due to slower growth, weighing on the USD. On the other hand, if employment is prioritized, inflation will run hotter, also causing the USD to lose value. In either case, the dollar is highly likely to remain under downward pressure, although some of these effects may already be priced in. 

AUDUSD vs CNYUSD

Relative to the US, Australia is expected to grow by 2.20 percent in 2026, with inflation projected to remain at 2.68 percent. There are downside risks to both inflation and GDP due to tariffs, particularly on copper and aluminum. Australia’s main export partner is China, which has been hit by US tariffs hard, though the damage has been relatively contained so far. 

Meanwhile, the aggressive tariff and geopolitical policies of the US are pushing many countries closer to China. The most notable shift has come from India, traditionally seen as an economic rival. With its large population, strong technology tendency of the population, and low labor costs, India has long been viewed as an alternative to China by international businesses. Its recent slight shift toward the China–Russia axis could be a major game changer for global economics in the coming years. 

China’s advances in AI are another key factor, as the country is no longer far behind the US. This could give the CNY an advantage despite tariff pressures. 

AUDUSD and CNYUSD are highly correlated due to trade volume and their commodity-based, co-dependent relationship. China is a massive consumer of commodities, driven by high growth and manufacturing needs, while Australia is heavily resource- and agriculture-based. Nearly 27 percent of Australia’s exports go to China. A strong China and a strong CNY are highly positive for the AUD. Over the last five years, AUDUSD and CNYUSD have shown a 91 percent correlation. 

 
(AUDUSD vs Commodities) 

According to the Reserve Bank of Australia, 59.2 percent of total exports are resource-based and 11.6 percent are rural-based, making a combined 70.8 percent. Because of this composition, the performance of the Australian dollar is heavily tied to commodities. 

Since Covid, manufacturing has lagged behind services. However, the recent push from the Trump administration and rising demand for copper suggest that manufacturing may be returning to center stage. This would mean more demand for commodities and is bullish for AUDUSD. 

The key will be expectations versus realizations. If the Bloomberg Commodity Index begins to make higher highs, it could serve as a strong signal for AUD bulls.  
 
(Relative Fiscal Health of Australia and US) 

The US has a much higher debt and budget deficit ratio compared to Australia. End-of-2025 forecasts show a 6.30 percent deficit for the US versus just 1 percent for Australia. Despite recent tariff revenues, the US is still far from fiscal recovery. Measures such as the stablecoin “Genius Act” are important for reducing bond yields and offsetting expenditures, but they may fall short of what is needed. 

The US current account-to-GDP ratio also shows no meaningful recovery from tariffs and is expected to widen further. Altogether, these factors point to a bullish outlook for AUDUSD. 

(Relative Payrolls Change) 

The hot topic in financial markets right now is the jobs market health. Rising risks to US employment are becoming clear, with a visible downtrend in net job changes. The US unemployment rate stands at 4.3 percent, compared to 4.2 percent in Australia. 

Australia also has a higher participation rate, and its net job gains show a much flatter downtrend with only occasional big drops. With higher inflation expectations and a weaker jobs market, the USD is holding the shorter stick in labor market comparisons as well. 

(Rate Cuts Expectations) 

Australia is already in a rate-cutting cycle, and the US has just entered one as well. By the end of 2026, the Reserve Bank of Australia is expected to cut rates twice, while the Federal Reserve is expected to cut around 4.5 times (with a fifth cut carrying a 50 percent probability). Futures markets imply rates for both Australia and the US will be close to 3 percent by 2027. 

Faster cuts from the Fed could be bullish for AUDUSD, but some of this is already priced in. If circumstances change and the Fed cuts less than expected, momentum could easily shift back in favor of the USD.  
 
(Relative Yields) 

US and Australian 10-year bond yields are relatively close. Despite Australia’s better fiscal outlook, stronger growth expectations, and lower inflation outlook combined with lower rates, Australian bonds are still paying higher yields to debt holders. Although US debt and the dollar are seen as reserve assets, there is a significant imbalance between fundamentals and yields when comparing the two countries. 

A potential rise in commodity prices in the coming months could easily drive higher demand for Australian debt and provide a boost to AUDUSD.  
 
(AUDUSD – Monthly Timeframe) 

As much as fundamentals are key to the long-term balance between currencies, the final say always lies with the markets and the best way to assess market sentiment is through price. AUDUSD has been trending down since 2011, mirroring the uptrend in the dollar index. 

In late 2024, there was a monthly close above the trend, but it quickly reversed into a three-month selloff. Now the price is above the trend once again. If it can hold there, this could be the trend-changing signal that Aussie bulls have been waiting for. 
 
(AUDUSD – Daily Timeframe) 

Since 2021, there has also been a downtrend channel that shares its upper line with the long-term downtrend. AUDUSD is now above both downtrend lines and has formed a shorter-term uptrend channel. Ahead of this week’s FOMC meeting, the upper line of the short-term uptrend channel was tested, and a downward reaction began. 

Unless the price breaks the uptrend channel and permanently re-enters the downtrend, these downward reactions could present buying opportunities for the medium- to long-term bullish case. In the end, however, the final say will always lie with the markets, despite the very positive fundamental outlook in favor of the Australian dollar against the US dollar.