AUD/USD fell about 0.5% on Thursday. Even so, it stayed near multi-year highs after pushing above 0.7140, the highest level since February 2023. The drop followed comments from the Reserve Bank of Australia (RBA) that it could raise rates again if inflation stays high. Earlier this month, the RBA raised the cash rate by 25 basis points to 3.85%. Markets now price a 74% chance of another hike in May. They also price in 38 basis points of additional tightening by year-end. Meanwhile, consumer inflation expectations rose to 5% in February, the highest since mid-2025.

Key Macro Drivers

AUD gains were capped by weak Chinese CPI data and ongoing producer price deflation. This points to softer demand and could weigh on Australian exports. In the US, January Non-Farm Payrolls came in at 130K versus 70K expected, and the unemployment rate fell to 4.3%. Focus now shifts to the delayed US January CPI report. Forecasts are 0.29% month-on-month for headline CPI and 0.39% for core CPI. On the technical side, AUD/USD was near 0.7118 after a 0.7148 high. Support sits around 0.7100 and 0.6932, while resistance is at 0.7148, then 0.7200 and 0.7250. With the RBA staying firm on inflation, we still see the path of least resistance for AUD/USD as higher. The policy split remains clear: the US Federal Reserve held rates steady through the second half of 2025, while the RBA continued tightening. This difference supports a bullish view for the Aussie in the weeks ahead. Given the strong uptrend, buying call options is a simple way to express this view. It offers defined risk with meaningful upside. One approach is to target strikes above the key 0.7150 resistance level, such as 0.7200, with March or April expiries to give the trend time to extend. Recent data also shows speculative net-long positions rising for weeks, which suggests the trade aligns with current market momentum.

Risk And Trade Setup

That said, daily RSI is nearing overbought levels. At the same time, worries about Chinese demand are pressuring iron ore prices, which have eased to about $135 per tonne. This raises the risk of a pullback. A practical approach is to treat dips toward the 0.7100 or 0.7050 support areas as chances to start long exposure. Selling cash-secured puts or using bull put spreads at those lower levels can help generate premium while waiting for a better entry. The key near-term event is today’s US CPI release, which is likely to set the tone into next week. A softer inflation print would likely weaken the US dollar and could be the trigger that pushes AUD/USD cleanly above 0.7150. A hotter CPI number, on the other hand, could create the pullback needed to add bullish positions at better prices. Create your live VT Markets account and start trading now.

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