AUD/USD Eases Slightly, But Remains Firmly In Bull Country

10 and one 10 us dollar bill

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The Australian Dollar rallied to a fresh three-and-a-half-year high above 0.7140 this week after the Reserve Bank of Australia (RBA) reinforced its hawkish stance. Governor Michele Bullock warned the board remains prepared to raise rates further if inflation proves persistent, describing any inflation "with a three in front of it" as unacceptable. Deputy Governor Hauser echoed this stance a day earlier, noting inflation remains too high and continues to pose a challenge for the rate-setting board. The RBA hiked its cash rate by 25 basis points to 3.85% earlier this month, and markets now price a 74% chance of another increase in May, with 38 basis points of additional tightening expected through year-end. Consumer inflation expectations jumped to 5% in February, the highest since mid-2025, adding to the hawkish narrative. However, a weaker Chinese Consumer Price Index (CPI) and persistent producer price deflation signaled softer demand for Australian exports, capping gains.

On the US Dollar side, January Non-Farm Payrolls (NFP) came in at 130K (above the 70K consensus) while unemployment fell to 4.3%, tempering expectations for near-term Federal Reserve (Fed) rate cuts. Looking ahead, Friday's delayed US CPI release for January will be the key driver, with economists forecasting headline CPI at 0.29% month-on-month and core CPI at 0.39% month-on-month. A softer print could widen the Fed-RBA policy divergence further in favor of the Australian Dollar.

Technicals punch in a potential hard ceiling near 0.7150

On the daily chart, AUD/USD is holding near 0.7118 after printing a session high of 0.7148, its highest level since February 2023. The pair has rallied for six consecutive weeks and trades well above the 50-week and 100-week Exponential Moving Averages (EMA), confirming a strong bullish trend. The Average Directional Index (ADX) has risen to 23 on the weekly timeframe, its highest reading in weeks, signaling trend strength is building. The Relative Strength Index (RSI) is continuing to climb, though approaching overbought territory on the daily chart.

On the 4H timeframe, the pair pulled back from the 0.7148 high to test support near the former resistance zone at 0.7100, which now acts as a near-term pivot. The September 2024 swing high at 0.6932 has been decisively broken and serves as a key support level on any deeper retracement. Immediate resistance sits at the 0.7148 session high, with a break above targeting the psychological 0.7200 handle and the 0.7250 zone. A failure to hold 0.7100 could see a pullback toward the 0.7050 to 0.7000 demand zone, where buyers are likely to re-emerge given the broader bullish structure.