The RBA lifted rates in February to 3.85%, its first increase in more than two years. The meeting minutes highlighted risks from high inflation and left the door open for further tightening. January jobs data also surprised on the strong side: unemployment held at 4.1% (vs 4.2% expected), and the number of unemployed fell for a fourth straight month. US FOMC minutes warned that disinflation could be “slower and more uneven” than expected, and some members did not rule out further rate hikes. Markets now price a 94% chance the Fed holds in March, with US Q4 GDP and core PCE due on Friday.

Technical Picture For Aud Usd

AUD/USD traded near 0.7050 on Thursday after hitting a year-to-date high of 0.7147 in early February. It is still above the 50-day EMA at 0.6865 and the 200-day EMA at 0.6625, extending the uptrend from January lows near 0.6664. Price has been moving sideways in a 0.7000 to 0.7100 range, with 0.7000 acting as support. The Stochastic Oscillator has turned down from overbought levels toward neutral. Doji and small candles near 0.7050 also suggest uncertainty ahead of Friday’s US data. Resistance sits at 0.7147, then 0.7200 if that breaks. Support is at 0.7000, then 0.6900 and 0.6865. Looking back to early 2025, markets were stuck in a tug-of-war as both the RBA and the US Federal Reserve signaled a tough stance on inflation. At the time, the Australian dollar was consolidating below the key 0.7147 resistance level. That tight range showed uncertainty about which central bank would stay more aggressive. The RBA’s concerns from last year have proven justified. Australian inflation has remained sticky, with the latest quarterly CPI at 3.6%. In response, the RBA has kept the cash rate at 4.35%. A strong labour market also reduces the pressure to cut soon, with unemployment at 3.9% (Australian Bureau of Statistics). This resilience continues to support the Australian dollar.

Policy Divergence And Trading Implications

By contrast, the Fed’s worries about “uneven” disinflation have eased. The US Core PCE Price Index has fallen to a more manageable 2.6% year-over-year. This has shifted expectations, with federal funds futures now pricing more than a 70% chance of at least one rate cut by the third quarter. This policy split has become a key driver in FX markets. The widening gap between a firm RBA and a softening Fed has helped AUD/USD break decisively above the 0.7147 resistance that capped the market in early 2025. Implied volatility in AUD/USD options has also risen from last year’s lows, showing that traders expect larger moves as this central-bank divergence plays out. Over the next few weeks, we expect traders to position for further AUD strength against the USD. One way to express this view is by buying AUD/USD call options with strike prices around 0.7400. This can capture further upside while keeping risk defined, especially if the Fed turns even more dovish. The main risk is stronger-than-expected US data, which could delay Fed rate cuts. Traders should watch US employment and inflation closely. Put options with strike prices below the old 0.7200 resistance (now support) can be a relatively low-cost hedge against a sudden reversal. Create your live VT Markets account and start trading now.

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