The Australian dollar rose over 0.80% against the US dollar on Wednesday. AUD\/USD traded at 0.7118 after rebounding from a low of 0.7057.<\/p>\n
Australian inflation data beat forecasts in January, increasing expectations of tighter Reserve Bank of Australia (RBA) policy. CPI rose 0.4% month-on-month versus 0.3% expected, while headline inflation was 3.8% year-on-year and trimmed mean inflation rose from 3.3% to 3.4% year-on-year.<\/p>\n
Federal Reserve officials also spoke, including comments from Thomas Barkin and Jeffrey Schmid. Governor Michelle Bullock said the economy changed rapidly since mid-2025, after disinflation progressed and growth slowed.<\/p>\n
The RBA raised rates by 25 basis points earlier this month to 3.85% following a strong jobs report. Markets priced Fed cuts totalling 51 bps by year-end, while the RBA was projected to raise rates by 45 bps.<\/p>\n
The week ahead includes Australia\u2019s Private Capital Expenditure, expected at 0%, and US Initial Jobless Claims on Thursday. Technical levels cited included support near 0.7050, 0.7000 and around 0.6900, with resistance at 0.7150, 0.7200 and 0.7300, and RSI at 65.<\/p>\n
Back in 2025, we saw how a hot inflation report pushed the Australian dollar higher against the US dollar. That report showed underlying inflation at its highest in over a year, forcing the Reserve Bank of Australia (RBA) into a more aggressive stance. This policy divergence has been a key theme, with AUD\/USD now trading near 0.7450.<\/p>\n
The RBA did follow through on the hawkish sentiment, bringing the cash rate to its current level of 4.35% in late 2025. While inflation has cooled from its peak, the latest data shows it remains sticky at 3.9% year-over-year, which is well above the RBA’s target. This persistent pressure justifies the central bank’s decision to hold rates high for now.<\/p>\n
Australia’s labor market remains remarkably tight, with the unemployment rate holding at just 4.1% as of January. This strength gives the RBA little reason to consider easing policy in the near term. This contrasts with the U.S. Federal Reserve, which has maintained a cautious tone after a single 25 basis point cut in late 2025.<\/p>\n
For derivative traders, the positive carry on long AUD positions remains attractive due to the interest rate differential. However, with the initial explosive rally now maturing, we believe selling out-of-the-money puts or implementing bull put spreads could be a prudent strategy to collect premium while maintaining a bullish bias. Watch for the pair to find support near the 0.7300 level, which was the previous upside objective back in 2025.<\/p>\n
We should remain mindful of shifts in global market sentiment, as the Australian dollar is sensitive to risk-off moves. A sudden spike in US inflation could quickly reverse the Fed’s dovish lean, narrowing the policy divergence that has supported the Aussie. Therefore, keeping an eye on implied volatility in AUD\/USD options is crucial for managing risk in the weeks ahead.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Australian dollar jumps 0.8% as inflation beats forecasts, boosting RBA hike bets; traders eye key levels.<\/p>\n","protected":false},"author":62,"featured_media":16964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-43647","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t