AUD/USD has remained largely unchanged throughout the trading week, hovering near 0.7000 after several volatile sessions during which the pair moved from above 0.7120 to around 0.6910 and back again. The pair remains caught between two opposing forces: expectations of a domestic rate hike supporting Australia and broad demand for the safe-haven US dollar holding back any sustained recovery.
The short-term catalyst will be the Wednesday publication of the February Consumer Price Index (CPI) at 00:30 GMT. Headline inflation is expected to remain at 3.8% y/y on a constant monthly reading, while the Reserve Bank of Australia’s (RBA) preferred trimmed average is expected to remain at 3.4% y/y. A reading equal to or above the consensus would strengthen the case for a third consecutive interest rate hike at the May 5 meeting, with all four major banks already expecting a 25 basis point boost to 4.35%.
A softer print, particularly on the trimmed average, could give the RBA time to take a break and would likely drag the Aussie lower. Importantly, this data was collected before the worst of the Strait of Hormuz energy shock had fully impacted domestic fuel prices, meaning it represents a lower bound on inflationary pressures rather than an upper bound. Governor Michele Bullock emphasized that “every meeting is live” and that the board would not wait for the full quarterly CPI report (due in tardy April) before taking action if needed. The RBA’s February forecasts lowered average inflation, which will peak at 3.7% in mid-2026 and only return to the target range of 2-3% in early 2027.
On the US side, the rest of the week’s data includes Thursday’s jobless claims (consensus 210,000 vs. 205,000 earlier) and a vast number of Federal Reserve (Fed) representatives speaking, followed by Friday’s final reading of consumer sentiment at the University of Michigan (UoM) for March (consensus 53.8 vs. 55.5 earlier) and closely watched one-year and five-year inflation expectations.
AUD/USD Hourly Chart
Technical analysis
On the 1-hour chart, the AUD/USD rate is 0.6996. The short-term bias is slightly bearish as price holds below the 200-period exponential moving average near 0.7033, keeping the pair low after repeated failures to sustain gains above 0.7000 early in the session. The recent bounce of the Stochastic RSI from the oversold area, now rising to the mid-range, signals softening downside momentum rather than a clear bullish reversal, suggesting that upside gains are likely to be met with selling pressure while the pair remains below its long-term average.
Initial resistance is established at 0.7000, where recent daily highs and psychological supply converge, followed by a stronger barrier at the 200-EMA around 0.7033, which marks the upper limit of the current correction phase. On the other hand, immediate support is emerging at 0.6965 from the recent cluster of lows, with a break that exposed 0.6950 as the next bearish target. As long as the spot holds between support at 0.6965 and resistance at 0.7033, the pair risks further probing lower levels if momentum fails to lead to a sustained move above 0.7000.
(The technical analysis for this story was written with the support of an AI tool.)
Australian Dollar FAQs
One of the most vital factors for the Australian dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor influencing price is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as Australia’s inflation, its dynamics and its trade balance. Market sentiment – whether investors take on riskier assets (risk-on) or look for secure havens (risk-off) – also matters, with positive risk for the AUD.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the interest rates that Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA’s main goal is to maintain a stable inflation rate of 2-3% by raising or lowering interest rates. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low ones. The RBA may also exploit quantitative easing and tightening to influence lending conditions, the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian dollar (AUD). When the Chinese economy does well, it buys more raw materials, goods and services from Australia, increasing demand for the AUD and increasing its value. The opposite is the case when the Chinese economy is not growing as rapid as expected. Positive or negative surprises in Chinese growth data therefore often have a direct impact on the Australian dollar and its pairs.
Iron ore is Australia’s largest export, worth $118 billion a year in 2021 figures, with China being the main buyer. The price of iron ore can therefore influence the Australian dollar. Generally speaking, if the price of iron ore increases, the AUD also increases, as aggregate demand for the currency increases. The opposite is true when the price of iron ore falls. Higher iron ore prices also tend to result in a greater likelihood of a positive trade balance for Australia, which is also positive for the AUD.
The trade balance, or the difference between what a country earns from exports and what it pays for imports, is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought after export, then its currency will only appreciate in value as a result of the excess demand created by foreign buyers wanting to buy its exports compared to spending on import purchases. Therefore, a positive net trade balance strengthens the AUD, and the effect is opposite if the trade balance is negative.
