AUD/USD moved above 0.71 and moved closer to its 2023 high after Australia’s January CPI came in hotter than expected. The pair gained 0.74%, its biggest one-day rise since 11 February, with spot back near 0.7150.
January headline CPI held steady at 3.8%. Core trimmed mean inflation ticked up to 3.4% from 3.3%. On the month, the core measure rose 0.3%.
Market Repricing And Technical Backdrop
Markets now fully price a second 25 bp RBA hike, taking the cash rate to 4.10% in May. AUD/USD has moved into a short consolidation phase after breaking out of a multi-month range.
On a pullback, first support sits at the February low of 0.6890. Above 0.7150, key technical targets are 0.7220 and 0.7400.
Governor Bullock is due to speak later, and capital expenditure data is due tonight. The article notes it was produced using an AI tool and reviewed by an editor.
Last year, the Aussie dollar broke higher after a surprise inflation print pushed it above 0.7100. Markets quickly priced in several RBA hikes, expecting the move to continue. The rally later faded near the 0.7150 area, which marked the early-2025 high.
Implications For Derivatives Positioning
Today’s setup is different, even though the RBA cash rate is now 4.35% (above the 4.10% priced back then). Q4 2025 inflation showed headline CPI cooling to 3.4% year over year, which has kept the RBA firmly on hold. That removes the main catalyst behind last year’s strong buying.
At the same time, the U.S. Federal Reserve is still more hawkish. Its policy rate remains at 5.50% after a stronger January 2026 jobs report showed 225,000 new jobs. This rate gap favors holding U.S. dollars over Australian dollars and limits the room for a sustained AUD rally. Forward markets now point to a wider rate differential for at least the next six months.
For derivatives traders, this backdrop makes outright AUD/USD call buying harder to justify in the near term. Implied volatility has been edging higher, so selling call spreads could be one way to earn premium. However, a ceiling “around 0.6800” does not fit with the current spot level near 0.7150 and may be a typo; in practice, the call-spread strikes would typically sit above spot.
Commodity prices also matter. Iron ore, a key Australian export, has dropped below $120 per tonne after trading near $140 for much of late 2025. That weakness adds another headwind for the Australian dollar.
With these forces in play, last year’s upside targets of 0.7220 and 0.7400 look much less likely in the near term. Traders may instead look at puts or put spreads to hedge against a move back toward the 0.6500 support area seen last October. Overall, the bias looks sideways to lower.
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