AUD/USD traded in a narrow range near 0.7060 on Tuesday, up less than 0.1%. For almost four weeks, it has held inside a roughly 150-pip band between 0.7000 and just under 0.7150, as traders wait for Australia’s CPI report on Wednesday.
The Reserve Bank of Australia (RBA) raised rates by 25 basis points to 3.85% at its February meeting. This was the first hike since November 2023. Markets are pricing in about a 76% chance of another increase by May, as inflation remains above the 2%–3% target range.
Australian Inflation In Focus
Australia’s January CPI is expected to come in at 3.7%, down from 3.8%. Trimmed mean CPI is forecast to stay at 3.3%. The report is due Wednesday and is a key near-term driver for the Australian Dollar.
In the US, President Trump announced new 15% global tariffs after a Supreme Court ruling last Friday blocked earlier tariff measures. US consumer confidence rose to 91.2 in February from 89. However, the expectations index has stayed below 80—the level that can signal recession risk—for 13 straight months.
From a technical view, AUD/USD is trading above the 50-day EMA near 0.6890 and the 200-day EMA near 0.6660, after rebounding from the January low around 0.6590. A break above 0.7150 could open the door to 0.7200. A drop below 0.7000 could put focus back on the 50-day EMA.
A year ago, the Australian Dollar was consolidating near 0.7100, and many traders expected another RBA rate hike. Markets were pricing a move by May 2025 as inflation stayed stubbornly high. The setup looked bullish, with price holding well above key moving averages.
Shift In Market Regime
That optimism did not last. The US move to impose new 15% global tariffs hurt risk sentiment and capped the Aussie’s advance just below 0.7150. The uncertainty later pushed the pair to break its uptrend in the second quarter of 2025.
As the year went on, Australian inflation started to cool. The latest quarterly data for December 2025 showed CPI had eased to 3.1%. That was a meaningful drop from the 3.7% forecast in January 2025. This shift has moved the RBA’s stance from hawkish to neutral.
The RBA delivered one more rate hike in May 2025, taking rates to 4.10%, and has held steady since then. The debate has shifted away from when the next hike will happen and toward when the central bank may start considering cuts. The market has now fully removed expectations of further tightening through the rest of 2026.
Now, with AUD/USD trading near 0.6620, conditions look very different from the bullish consolidation seen a year ago. Instead of buying dips for a breakout, traders are leaning toward selling rallies into established resistance. The 50-day moving average, once solid support, is now an important resistance level near 0.6710.
For derivatives traders, this shift favors strategies built for a lower, more range-bound market. Examples include buying longer-dated put options to hedge against more downside, or selling call spreads above the 0.6750–0.6800 resistance zone. Volatility from early 2025 has faded, so the focus may be more on collecting premium than chasing momentum.
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