Shift In The Macro Backdrop
They expect AUD/USD to find demand around 0.69 if the US Dollar strengthens further due to escalation in the Middle East conflict. For crosses, they see AUD/CAD moving lower, based on terms of trade effects and differences in exposure to China versus the US. The article says it was produced using an AI tool and reviewed by an editor. Looking back at our constructive view on the AUD from 2025, the landscape has clearly shifted by March 2026. The Reserve Bank of Australia has moved away from its hiking cycle, now signaling a data-dependent pause that removes a key pillar of support for the currency. This contrasts with the tight 5-4 vote for a hike we analyzed last year. The positive terms of trade shock we saw from LNG exports has also moderated significantly. Recent data from the Australian Bureau of Statistics shows LNG export values dipped 4.2% in the first quarter of 2026 due to a mild northern hemisphere winter. This weakens the fundamental story that was so compelling back in 2025.Trading Implications For Aud
With AUD/USD now trading around 0.6750, the 0.6900 level we once viewed as strong support has become resistance. Derivative traders could consider buying AUD/USD put spreads, targeting a move towards the 0.6600 handle. This strategy defines risk while positioning for further downside driven by yield differentials. While the structural hedging flows from Australian pension funds still provide some underlying demand for the AUD, they are not enough to counter the shifting interest rate outlook. These flows are creating minor bounces rather than a sustained trend. Traders should see these as opportunities to position for the next leg lower. Our call in 2025 for AUD/CAD to correct lower remains a high-conviction view. China’s latest manufacturing PMI reading for February 2026 remains in contraction at 49.8, weighing on the Aussie, while a resilient US economy supports the Canadian dollar. Selling AUD/CAD futures or establishing short positions through options continues to look attractive. Create your live VT Markets account and start trading now.
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