Trading the Australian Dollar in 2024-2026: AUD/USD, AUD/JPY, and Euro to AUD Forecast Guide

Understanding AUD’s Market Position and Historical Context

The Australian Dollar commands significant attention in global forex markets, accounting for roughly 6% of daily trading volume. Among currency pairs, AUD/USD stands as one of the most liquid instruments available to traders worldwide. But what drives the AUD’s movements, and how should traders approach positioning in 2024-2026? Understanding the currency’s 20-year trajectory reveals the answer.

From 2004 through the 2007-2009 Global Financial Crisis, the AUD surged to 97 points—its highest level since 1983—before plummeting 35% to 62 during the crisis itself. The subsequent recovery proved dramatic: by July 2011, AUD climbed to a historic 110 points, reflecting a 77.6% rebound driven primarily by China’s voracious demand for Australian mining exports. This mining-led boom era shaped trader expectations for years.

However, the boom’s end in mid-2013 triggered sustained depreciation. China’s 2015 economic slowdown accelerated the decline, with AUD touching 68 in January 2016. The narrowing interest rate differential between Australia and major economies further pressured the currency. A brief 2016-2017 recovery (70-80 points) faded as the downtrend resumed, ultimately reaching 58 in March 2020 during the COVID-19 shock. Recovery followed, but inflation and central bank policy shifts have kept AUD near 68 as of September 2024—substantially below its 2011 peak.

Key Drivers Behind AUD Movement: Commodity Prices, Interest Rates, and China

Three fundamental forces dominate AUD trading in the current cycle:

Commodity Price Dependency: Australia’s export-driven economy means iron ore, coal, and gold prices directly influence AUD strength. When commodity prices decline, so does demand for Australian exports, weakening the currency.

Interest Rate Differentials: The Reserve Bank of Australia’s monetary policy stance relative to the Federal Reserve and other central banks creates carry trade opportunities. Higher RBA rates attract foreign capital, supporting AUD; rate cuts do the opposite.

China’s Economic Health: As Australia’s largest trading partner, China’s growth trajectory matters enormously. Positive Chinese economic data typically strengthens AUD, while slowdowns or deflationary pressures weaken it. The 2023 deflation in China, for instance, pressured AUD/USD throughout the year.

Breaking Down Recent Performance: AUD/USD, AUD/JPY, and Euro to AUD

AUD/USD Through 2024: The pair opened 2024 near 0.68 but compressed into a tight 0.64-0.68 range by February through September. The Fed maintained rates at 5.25%-5.5% while the RBA held at 4.35%—a narrowing differential that limits AUD upside. This range-bound behavior reflects equilibrium between competing forces: modest risk appetite supporting exports versus tight monetary conditions globally.

AUD/JPY: Capturing the Yen’s Weakness: This pair tells a different story. From January to May 2024, AUD/JPY rallied approximately 6.72%, climbing from 96 to 108, before retreating to 97 by September. Japan’s technical recession in late 2023 and loss of world’s third-largest economy status to Germany drove Yen depreciation. Even after Japan ended its negative interest rate policy in March 2024 (moving to 0-0.1%), Yen strength remained elusive due to structural challenges. This pair offers different trading opportunities than AUD/USD.

Euro to AUD Forecast Context: EUR/AUD presents an alternative vehicle for AUD exposure. Throughout 2024, this pair has ranged sideways between 1.62-1.63 due to minimal monetary policy divergence between the Eurozone and Australia. Unlike AUD/JPY’s volatility or AUD/USD’s structural headwinds, EUR/AUD reflects relative stability in two advanced economies with similar policy trajectories.

2022-2023 Analysis: Patterns That Inform 2024-2026 Trading

In 2022, AUD/USD fell from 0.72 to 0.68 as Fed rate hikes outpaced RBA increases—a classic carry trade unwind. The pair bottomed at 0.61 in October before partial recovery. The same pattern repeated in 2023: early-year strength to 0.71 gave way to 0.61 by October as Fed maintained higher rates, then recovered to 0.68 year-end. This boom-bust annual cycle reflects the AUD’s sensitivity to interest rate moves and risk appetite shifts.

AUD/JPY showed opposite characteristics, benefiting from Australia’s rate hikes relative to Japan’s ultra-loose policy. In 2022, it climbed to 95 before retracing; 2023 saw steady appreciation from 88 to 96 year-end.

EUR/AUD absorbed European energy crisis fears in early 2022 (dropping 7% to 1.437) but recovered as ECB tightening offset geopolitical damage. By year-end 2022, the pair reached 1.57, then maintained an 1.56-1.69 range in 2023—far less volatile than AUD/USD or AUD/JPY.

2024-2026 Forecasts: What Major Institutions Expect

Financial institutions’ consensus reveals competing scenarios:

AUD/USD Outlook:

• 2024: Forecasts cluster around 0.64-0.72, with Westpac at 0.66-0.67 (bearish) and NAB at 0.69-0.72 (bullish)
• 2025: Consensus widens to 0.59-0.78, suggesting genuine uncertainty about interest rate divergence
• 2026: Long Forecast predicts weakness (0.62-0.65) while NAB sees strength (0.76-0.78)

The split reflects disagreement on whether Fed rate cuts (which would support AUD) will materialize or persist. If the US maintains higher rates longer, AUD faces headwinds; if Fed cuts aggressively, AUD could appreciate.

AUD/JPY Forecast:

• 2024-2026 shows consistent bearish bias: NAB forecasts declines from 97 to 87-92 to 87-90, suggesting Yen eventual stabilization as Japan’s rate hikes take effect
• Contrasting forecasters (Long Forecast, Coincodex) expect continued strength to 112-126, betting on sustained Yen weakness
• The wide range (87-134) reflects fundamental disagreement about Japan’s ability to defend Yen strength

Euro to AUD Forecast:

• 2024-2026 predictions range from 1.44 to 1.75, with most clustering around 1.55-1.65
• The relative stability versus other pairs reflects Eurozone-Australia policy synchronization
• Upside scenarios (toward 1.70+) depend on European strength outweighing AUD support; downside (1.45) assumes AUD outperformance

Trading Framework: Should You Buy AUD Pairs?

Advantages of Trading AUD:

• Superior liquidity means tight spreads and minimal slippage
• Resource-rich economy provides commodity-linked upside during boom cycles
• Interest rate differentials create defined carry trade mechanics
• Asian trade ties offer unique diversification benefits
• Strong economic fundamentals support long-term stability

Disadvantages Requiring Careful Risk Management:

• Commodity price vulnerability means geopolitical shocks (supply disruptions, Chinese demand collapse) hit hard
• Global risk sentiment swings can trigger rapid reversals
• RBA policy divergence from Fed/ECB creates currency headwinds
• External economic shocks (natural disasters, health crises) disproportionately impact an export economy

Practical Trading Strategy for AUD Pairs

For traders considering AUD exposure, a multi-pair approach works best:

AUD/USD for directional bets on interest rate differentials—use when you anticipate Fed pivot or RBA staying higher for longer than consensus expects.

AUD/JPY for capturing Yen weakness trades—ideal when Japan maintains ultra-loose policy despite rate moves or faces structural economic challenges.

EUR/AUD for lower-volatility AUD exposure—suitable for traders preferring range-bound strategies over directional moves, particularly during periods of policy convergence.

Risk Management Essentials:

• Position size based on account equity, not wishful thinking
• Stop-loss orders set at key technical levels (typically 2-3% below entry)
• Portfolio diversification across multiple AUD pairs reduces single-trade catastrophe risk
• Monitor RBA decision dates and Fed meetings as volatility catalysts
• Track commodity price indices (iron ore futures especially) for directional clues

What to Watch: Key Triggers for 2024-2026

RBA Rate Decisions: Each quarterly meeting creates volatility. Surprises either direction move AUD 100+ pips.

Fed Policy Signals: Interest rate differential compression or expansion between the Fed and RBA remains the dominant force.

China Economic Data: GDP growth, manufacturing PMI, and trade figures provide leading indicators for AUD strength.

Commodity Prices: Iron ore, coal, and gold warrant constant attention for AUD directional cues.

Geopolitical Events: Trade tensions, sanctions, or supply chain disruptions impact risk sentiment and AUD flows.

Final Assessment: 2024-2026 Trading Opportunity

The Australian Dollar’s direction through 2026 hinges on interest rate policy divergence, China’s growth trajectory, and global risk appetite. AUD/USD faces structural headwinds if Fed rates stay elevated; AUD/JPY offers better upside given Japan’s persistent weakness; euro to AUD forecast suggests a middle ground of stability.

Traders should approach these pairs not as passive long positions but as tactical opportunities requiring active monitoring. The forecasts presented by major institutions (Westpac, NAB, Long Forecast, Coincodex) reveal genuine disagreement, underscoring that 2024-2026 outcomes depend on macro events that remain uncertain.

Success requires continuous tracking of economic indicators, disciplined position sizing, and flexibility to adapt as conditions evolve. The AUD remains highly liquid and tradeable—but only for those who respect its volatility drivers and implement proper risk controls.