AUD/USD hovers close to 0.7000 as markets await crucial CPI release

AUD/USD Holds Steady Amid Competing Market Forces

The AUD/USD currency pair has shown little movement over the past week, stabilizing near the 0.7000 mark after experiencing sharp fluctuations between highs above 0.7120 and lows near 0.6910. The pair is currently influenced by two contrasting dynamics: expectations of further interest rate increases in Australia are lending support to the Aussie dollar, while persistent demand for the US Dollar as a safe haven is limiting any significant upward momentum.

Key Focus: Upcoming Australian CPI Data

The immediate market driver is the release of February’s Consumer Price Index (CPI), scheduled for Wednesday at 00:30 GMT. Analysts anticipate headline inflation will remain steady at 3.8% year-over-year, with no change on a monthly basis. The Reserve Bank of Australia’s (RBA) preferred trimmed mean inflation is also forecast to stay at 3.4% year-over-year. Should the data meet or exceed expectations, it would strengthen the case for the RBA to implement a third straight rate hike at its May 5 meeting, where all major Australian banks are already predicting a 25 basis point increase to 4.35%.

If inflation figures, especially the trimmed mean, come in below forecasts, the RBA may have the flexibility to pause its tightening cycle, which could put downward pressure on the Australian dollar. Notably, the CPI data was gathered before the full impact of the Strait of Hormuz energy shock was felt in domestic fuel prices, suggesting that current inflation readings may represent a baseline rather than a peak. RBA Governor Michele Bullock has emphasized that policy decisions are open at every meeting and that the board is prepared to act before the next quarterly CPI release if necessary. The RBA’s own projections see trimmed mean inflation reaching a high of 3.7% by mid-2026 and only returning to the 2%–3% target range in early 2027.

US Economic Events in Focus

On the US front, investors are watching for Thursday’s jobless claims report (expected at 210,000 versus 205,000 previously) and a series of speeches from Federal Reserve officials. Friday brings the final University of Michigan (UoM) consumer sentiment reading for March (projected at 53.8, down from 55.5) along with updates on one-year and five-year inflation expectations, both closely monitored by markets.

AUD/USD Hourly Chart Overview

Technical Outlook

On the one-hour timeframe, AUD/USD is currently trading at 0.6996. The short-term trend remains slightly bearish, with the pair trading below the downward-sloping 200-period exponential moving average (EMA) near 0.7033. This level continues to act as resistance after several unsuccessful attempts to hold above 0.7000 earlier in the session. The Stochastic RSI has rebounded from oversold levels and is now moving higher through the middle range, indicating that downward momentum is easing, but not signaling a decisive shift to bullishness. As a result, any rallies are likely to encounter selling pressure as long as the price remains below the long-term average.

• Resistance: The first hurdle is at 0.7000, where recent intraday highs and psychological resistance converge. A more significant barrier is found at the 200-EMA around 0.7033, marking the upper limit of the current corrective move.
• Support: Immediate support lies at 0.6965, reflecting a recent cluster of lows. A break below this level could open the door to further declines toward 0.6950.

As long as the pair remains confined between 0.6965 support and 0.7033 resistance, there is a risk of renewed downward pressure if momentum fails to push the price above 0.7000 for an extended period.

(This technical analysis was generated with the assistance of AI tools.)