AUD/USD Holds Near 0.7065 Ahead of January CPI Release

Traders' Opinions

Summary:

The Australian Dollar is quietly edging higher against a broadly resilient US Dollar as markets brace for a crucial local inflation print.

BUY AUDUSD

EXP

TRADING

0.70500

Entry Price

0.72150

0.69850

0.70580 +0.00006 +0.01%

0.0

Pips

Flat

0.69850

Exit Price

0.70500

Entry Price

0.72150

The Australian Dollar is proving to be a solitary outlier in the G10 currency space during early European trading on Tuesday, nudging higher against a US Dollar that remains surprisingly unshaken by the latest protectionist rhetoric from the White House. The Aussie is currently hovering near the $0.7065 mark, a modest 0.1% gain on the day, as the market’s collective gaze shifts decisively toward what could be a watershed moment for local monetary policy: the January Consumer Price Index report, due out Wednesday.

This tentative strength in the Antipodean currency isn’t born of broad-based risk appetite, but rather a specific, calculated anticipation. Investors are acutely aware that the Reserve Bank of Australia (RBA) is walking a tightrope. The central bank’s February policy meeting, in which it delivered a 25 basis point hike to bring the Official Cash Rate to 3.85%, was notable not just for the move itself, but for the distinctly hawkish prose that accompanied it. Governor Michele Bullock made it abundantly clear that the board’s tolerance for sticky inflation has worn thin.

“The inflation pulse is too strong, and we cannot allow inflation to get away from us again,” Bullock stated emphatically in the post-meeting press conference. That line has become the north star for AUD traders this week. It was a deliberate signal that the RBA, having perhaps moved later than some peers in this cycle, is prepared to act aggressively to prevent price pressures from becoming entrenched. Crucially, the statement left the door ajar for further tightening, a posture that stands in contrast to the more data-dependent, peak-rate vibes emanating from other central banks.

Wednesday’s data from the Australian Bureau of Statistics will now either validate Bullock’s concern or provide her with cover to pause. The consensus is looking for a slight deceleration in headline annual CPI to 3.7%, a tick down from December’s 3.8% reading. The more closely watched core measure, the Trimmed Mean CPI, is expected to remain stubbornly steady at an annualized 3.3%. If the core figure surprises to the upside, or if services inflation proves intractable, the market’s pricing for another RBA hike in the coming months will solidify rapidly, potentially propelling the Aussie through recent resistance levels. A softer print, however, could see the currency give back its recent gains just as quickly.

Yet, the Aussie’s path higher is far from a straight line, largely due to the peculiar resilience of its US counterpart. Despite President Donald Trump’s latest salvo on trade—threatening “much steeper” tariffs on nations he accuses of “playing games with existing trade agreements” following a Supreme Court ruling—the US Dollar Index (DXY) is trading marginally higher near 97.80. This suggests that for now, markets are viewing the threats as tactical negotiation rather than imminent policy, or perhaps that the demand for USD as a safe haven is still outweighing the potential negative domestic implications of a trade war.

This dynamic places the AUD/USD pair in a fascinating tug-of-war. The Aussie is being pulled higher by domestic rate expectations, while simultaneously being capped by a resilient Greenback and the ever-present shadow of US trade policy. For the pair to make a decisive break, it will likely need a significant catalyst. All eyes are now on the clock ticking down to Wednesday’s CPI release—a number that could very well dictate the RBA’s next move and, by extension, the near-term trajectory of the Australian Dollar.

Technical Analysis

AUD/USD remains positioned within a broader bullish recovery structure on the 4-hour chart, though price action is currently consolidating after a strong impulsive rally. The pair has been respecting a well-defined ascending trendline originating from the January lows, and recent pullbacks have consistently found support along this dynamic structure, reinforcing the medium-term bullish bias.

At present, price is trading near 0.7050, hovering just above a key confluence support zone between 0.7020 and 0.7040. This area aligns with the 45%–50% Fibonacci retracement levels of the recent upswing and has acted as a pivot region during the latest consolidation phase. The 61.8% Fibonacci level at 0.6994 represents a deeper corrective threshold. A decisive break below 0.6990, particularly if accompanied by sustained trading beneath the psychological 0.7000 handle, would signal structural deterioration and expose the 0.6950–0.6900 region, with the 100% retracement near 0.6898 acting as a major downside target. A move into this zone would suggest a broader trend correction rather than a shallow pullback.

The recent price compression forms a tightening structure just above ascending trendline support, suggesting building pressure for a directional breakout. As long as price continues to print higher lows along the trendline, the underlying bullish structure remains intact.

On the upside, immediate resistance is seen near 0.7145–0.7150, which marks the 0% Fibonacci retracement and a prior swing high. A sustained break above this barrier would confirm bullish continuation and likely open the path toward 0.7217 (−27% Fibonacci extension), followed by 0.7285 (−54% extension). A move through 0.7200 would likely attract renewed momentum buying and shift focus toward the 0.7300 psychological region.

Momentum conditions suggest consolidation rather than exhaustion. Price action has cooled after the prior rally, and the market appears to be rebalancing within a corrective range while maintaining structural support. The absence of aggressive lower lows indicates that selling pressure remains limited, supporting the case for an eventual upside resolution if trendline support continues to hold.

Overall, the broader bias remains cautiously bullish while price holds above 0.6990 and the ascending trendline. The current structure favors a continuation higher, provided support levels remain intact.

TRADE RECOMMENDATION

BUY AUD/USD

ENTRY PRICE: 0.7050

STOP LOSS: 0.6985

TAKE PROFIT: 0.7215

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