AUD/USD moved higher than expected, reaching 0.7143 and closing near 0.7127. There is scope for a test of 0.7150, after which pullback risk may rise, with 0.7175 as the next resistance.
Upward momentum is described as little changed despite the rise. Support levels are set at 0.7105 and 0.7085.
Near Term Levels And Momentum
Over a 1–3 week view, the tone remains positive while 0.7055 holds. A prior “strong support” level had been 0.7015.
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Looking back at the analysis from last year, we saw a positive tone for the AUD/USD, with a focus on breaking above 0.7175. That upward momentum did not last, as the key support level of 0.7055 was eventually broken later in 2025. Today, we are trading in a much different environment around the 0.6750 mark.
The primary driver is the interest rate differential, with the Reserve Bank of Australia’s cash rate at 4.35% and the US Fed Funds rate at a higher 5.50%. This gap continues to favour the US dollar, capping rallies in the Aussie. Recent inflation data in both countries has been unexpectedly firm, pushing back market expectations for rate cuts this year.
China And Macro Risks
Furthermore, we see continued sluggishness in China’s economic recovery, which directly impacts sentiment for the Australian dollar. Australia’s latest trade balance figures showed a smaller-than-expected surplus, partly reflecting weaker demand from key partners. This external pressure makes a sustained push higher difficult for the AUD.
For the coming weeks, we see the AUD/USD likely remaining within a defined range. Selling option volatility seems like a prudent strategy given the conflicting economic signals. We anticipate a probable trading channel between 0.6650 and 0.6850.
Derivative traders could consider strategies like selling strangles to collect premium, betting that the pair will not break out of this range. However, we must remain vigilant for any surprise shifts in central bank rhetoric. The next US inflation print and Australian employment data will be critical events that could trigger a move.
