Forex News
- Australia’s inflation is expected to remain steady, but upside risks are building.
- Middle East tensions reinforce expectations of further RBA tightening.
- The Australian Dollar trades near recent lows ahead of the inflation release.
The Australian Bureau of Statistics (ABS) will release the Consumer Price Index (CPI) for February on Wednesday at 00:30 GMT, with inflation expected to hold steady at 3.8% YoY and come in flat on a monthly basis. This release comes as the Reserve Bank of Australia (RBA) has already raised its key rate to 4.10%, highlighting concerns over persistent inflation. Policymakers remain focused on potential second-round effects, while markets increasingly anticipate another rate hike in the coming months.
Meanwhile, geopolitical developments are playing a growing role in inflation expectations. Escalating tensions in the Middle East and disruptions to energy supply routes are pushing Oil prices higher, which could soon feed into Australian inflation in the months ahead.
Ahead of the release, AUD/USD is pulling back on the day, trading near recent lows around 0.6960, as the US Dollar (USD) stabilizes following its recent decline.
What to expect from Australia’s inflation rate numbers?
February inflation data is expected to show broadly stable price pressures, but still above the RBA’s 2%-3% target range. Markets expect annual inflation to remain unchanged at 3.8% for a third consecutive month, while the monthly reading is seen falling to 0% after 0.4% in January. The RBA’s preferred inflation gauge, the Trimmed Mean CPI, is also expected to hold steady at 3.4% YoY.
However, these figures should be interpreted with caution. The February data does not yet fully reflect the recent surge in energy prices driven by the Middle East war and disruptions in the Strait of Hormuz.
According to Westpac, fuel prices actually declined during the period, partially masking underlying inflationary pressures. At the component level, housing-related costs such as rents and electricity continue to rise, alongside education and clothing prices, while lower fuel and travel costs help contain headline inflation.
Looking ahead, risks are clearly tilted to the upside. Westpac expects inflation to rise to around 4.6% YoY in the June quarter due to the energy shock. While the direct impact on core inflation is expected to be more limited, second-round effects via wages and inflation expectations remain a key concern.
In this context, markets continue to price in a hawkish bias from the RBA, with rising expectations of further rate hikes in the months ahead.
How could the Consumer Price Index report affect AUD/USD?
In this environment, an in-line inflation reading may have a limited impact on the Australian Dollar (AUD), as markets are already aware that energy-related inflation pressures are still in the pipeline.
However, a stronger-than-expected print, particularly in the Trimmed Mean CPI, would reinforce expectations of further RBA tightening and support the Aussie.
On the other hand, a downside surprise could weigh on the Australian Dollar in the short term. That said, losses may remain limited, as markets are already anticipating a pickup in inflation driven by energy costs.
More broadly, AUD/USD direction will depend not only on domestic data but also on global risk sentiment and geopolitical developments, which continue to shape both inflation expectations and the outlook for monetary policy.
From a technical perspective, in the 4-hour chart below, AUD/USD near-term bias is mildly bearish as the pair holds beneath a descending resistance trend line, with price also trading below the 100-period Simple Moving Average (SMA) at 0.7059. The SMA has started to edge lower, indicating sellers retain the upper hand after the recent correction from the 0.7187 area. The Relative Strength Index (RSI) around 40 shows momentum leaning to the downside but not yet in oversold territory, suggesting room for further pressure while keeping scope for intermittent rebounds.
Immediate support is seen around 0.6950, where the horizontal line coincides with the latest downswing, followed by a lower support level around the 0.6900 level if selling extends. On the topside, initial resistance emerges near the 0.7060 region in line with the 100-period SMA, which would need to be reclaimed to ease current downside pressure. A sustained move above that area would open the way toward the trend-line zone around 0.7068, while failure to clear it would keep focus on the 0.6950 and 0.6900 supports.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Federal Reserve Bank of Chicago President Austan Goolsbee said on Tuesday that energy shocks can pose risks to both sides of the central bank mandate.
Key quotes
Energy shocks can pose risks to both sides of Federal Reserve mandate.
Not an obvious strategy for what you do.
It is a bad situation for a central bank. Uncertain if can cut rates again depending on duration of war. We have to see progress on inflation for it to be realistic to expect rates to come down this year.
Market reaction
At the time of press, the US Dollar Index (DXY) is up 0.09% on the day at 99.23.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
US President Donald Trump appears to be determined to reach a deal with Iran aimed at ending hostilities in the Middle East, Reuters reported on Tuesday.
The officials stated that they viewed it is unlikely that Iran would agree to US demands in any new round of negotiations, which broke down on February 28 with the launch of the US-Israeli war on Iran.
Key US Demands on Iran
1. Iran must dismantle its existing nuclear capabilities.
2. Iran must commit never to pursue nuclear weapons.
3. There will be no uranium enrichment on Iranian territory.
4. Iran must hand its stockpile of some 450 kilograms of uranium enriched to 60 percent to the International Atomic Energy Agency in the near future, in a timetable to be agreed.
5. The Natanz, Isfahan and Fordo nuclear facilities must be dismantled.
6. The IAEA, the UN’s nuclear watchdog, must be granted full access, transparency and oversight inside Iran.
7. Iran must abandon its regional proxy “paradigm.”
8. Iran must cease the funding, direction and arming of its regional proxies.
9. The Strait of Hormuz must remain open and function as a free maritime corridor.
10. Iran’s missile program must be limited in both range and quantity, with specific thresholds to be determined at a later stage.
11. Any future use of missiles would be restricted to self-defense.
12. Iran would receive a full lifting of sanctions imposed by the international community.
13. The US would assist Iran in advancing its civilian nuclear program, including electricity generation at the Bushehr nuclear plant.
14. The so-called “snapback” mechanism, which allows for the automatic reimposition of sanctions if Iran fails to comply, would be removed.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Federal Reserve (Fed) Governor Michael Barr said on Tuesday that the central bank may need to keep interest rates steady "for some time" before further cuts are warranted, noting continued inflation above the Fed's 2% target and the risks posed by the ongoing conflict in the Middle East.
Key quotes
War has increased risks given high oil prices.
Labor market seems to be stabilizing.
Rates may need to be on hold "for some time" given above target inflation.
If job market stays stable would need to see evidence of sustainable drop in inflation before cutting rates again.
Market reaction
At the time of writing, the US Dollar Index (DXY) is trading around 99.25, up 0.09% on the day.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- Sterling consolidates near weekly highs ahead of February inflation data that could shape whether the Bank of England holds rates or reopens the door to cuts at the April 30 meeting.
- The BoE held unanimously at 3.75% on March 19, a sharp shift from February's 5-4 split, with the minutes warning that CPI is now expected between 3% and 3.5% over the coming quarters as the Middle East energy shock feeds through.
- Friday's UK retail sales (MoM consensus -0.8% vs 1.8% prior) will test whether the demand side of the economy is weakening fast enough to offset inflation pressures.
GBP/USD is trading close to 1.3420 heading into Wednesday, holding onto most of the week's gains after a sharp round-trip from about 1.3250 on Monday's ceasefire-driven sell-off to near 1.3480 on Tuesday. The pair has stabilized well above the 1.3360 area, with Tuesday's late session fading slightly from the weekly highs in a narrow range.
Wednesday's February Consumer Price Index (CPI) release at 07:00 GMT is the key event for the midweek market session. January's reading came in at 3.0% YoY, down from 3.4% in December, with core CPI at 3.1% and services inflation at 4.4%. The consensus for February's core CPI is 3.1% YoY, holding steady. The Bank of England's (BoE) March meeting minutes noted that services inflation at 4.4% was well above the bank's 4.1% forecast and warned that the Middle East energy shock would push headline CPI to between 3% and 3.5% over the next few quarters. Governor Andrew Bailey described the situation as one where "monetary policy cannot reverse this shock to supply" but "must respond to the risk of a more persistent effect on UK CPI inflation."
The March decision was unanimous to hold, a notable shift from February's tight 5-4 split where four members had wanted to cut to 3.50%. Market-implied rates now slope slightly upward through 2026, with earlier expectations for near-term cuts all but abandoned. A hot CPI print on Wednesday, particularly in core and services, would reinforce the BoE's hawkish hold and support Pound Sterling, while a softer reading could revive some cut expectations ahead of the April 30 meeting.
Later in the week, BoE Deputy Governor Sarah Breeden and external member Megan Greene both speak on Thursday, followed by Friday's retail sales data (MoM consensus -0.8% vs 1.8% prior) and GfK consumer confidence (consensus -24 vs -19 prior), which will test how quickly the energy shock is weighing on household spending.
GBP/USD hourly chart
Technical Analysis
In the 1-hour chart, GBP/USD trades at 1.3419. The near-term bias is mildly bullish as price holds above the rising 200-period exponential moving average near 1.3360, keeping the broader hourly trend pointed higher despite recent sideways action. The latest Stochastic RSI uptick from depressed levels shows recovering momentum after an oversold condition, aligning with the pair’s ability to defend higher lows above the long-term average.
Initial support aligns at 1.3400, guarding a deeper pullback toward 1.3380 and then the 1.3360 area, where the 200-period EMA adds technical backing. On the topside, immediate resistance emerges at 1.3450, with a break exposing 1.3480 and then the 1.3520 region. As long as GBP/USD holds above 1.3380, buyers retain control of the intraday structure, while a sustained drop through 1.3360 would undermine the current bullish bias.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- USD/CHF gains as geopolitical tensions offset ceasefire optimism headlines.
- RSI improves as buyers gain traction near key resistance levels.
- Break above 0.7900 exposes 200-day SMA and 0.8000 target
The USD/CHF advanced by 0.24% on Tuesday as geopolitical tensions remained high, even after reports of a one-month ceasefire, according to Al Arabiya, citing Israeli Channel 12. At the time of writing, the pair trades at 0.7881 after bouncing off daily lows of 0.7859.
USD/CHF Price Forecast: Technical Outlook
The technical picture shows that USD/CHF is neutral to bullish, even though it remains below the 200-day Simple Moving Average (SMA) at 0.7949.
Momentum, as measured by the Relative Strength Index (RSI), shows that buyers are gaining traction, though if they want to test higher prices, they must clear key resistance levels on the upside.
If USD/CHF clears the 100-day SMA of 0.7893, expect a test of the 0.7900 figure. Once cleared, the next area of interest will be the 200-day SMA at 0.7949, followed by the 0.8000 threshold.
On the bearish side, if USD/CHF tumbles below the March 23 daily low of 0.7834, it could open the door to a challenge of the 50-day SMA key support at 0.7798. On further weakness, a retracement towards the March 10 swing low of 0.7748 is on the cards.
USD/CHF Price Chart – Daily
Swiss Franc Price This week
The table below shows the percentage change of Swiss Franc (CHF) against listed major currencies this week. Swiss Franc was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.67% | -0.80% | -0.43% | 0.30% | 0.02% | -0.33% | -0.06% | |
| EUR | 0.67% | -0.12% | 0.26% | 0.98% | 0.68% | 0.35% | 0.62% | |
| GBP | 0.80% | 0.12% | 0.34% | 1.10% | 0.82% | 0.47% | 0.67% | |
| JPY | 0.43% | -0.26% | -0.34% | 0.70% | 0.43% | 0.06% | 0.27% | |
| CAD | -0.30% | -0.98% | -1.10% | -0.70% | -0.26% | -0.63% | -0.37% | |
| AUD | -0.02% | -0.68% | -0.82% | -0.43% | 0.26% | -0.35% | -0.15% | |
| NZD | 0.33% | -0.35% | -0.47% | -0.06% | 0.63% | 0.35% | 0.20% | |
| CHF | 0.06% | -0.62% | -0.67% | -0.27% | 0.37% | 0.15% | -0.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Swiss Franc from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CHF (base)/USD (quote).
- Gold price rebounds to near $4,470 in Wednesday’s early Asian session.
- Traders will closely monitor the situation in the Middle East.
- Expectations of higher interest rates might cap the upside for Gold price.
Gold price (XAU/USD) recovers some lost ground to around $4,470 during the early Asian session on Wednesday. The precious metal edges higher following a period of extreme volatility, with the price falling to a four-month low near $4,100, its worst weekly performance since 1983.
Bloomberg reported on Tuesday that US President Donald Trump signaled that Iran had offered a “present” as a show of good faith in negotiations he has claimed are ongoing to end a 25-day conflict that’s upended global markets, even while he deploys more troops to the Middle East.
This headline came as Mohsen Rezaei, the senior military adviser to Iranian Supreme Leader Mojtaba Khamenei, said on Tuesday that the war will continue until Iran receives full compensation for damage it has sustained. Uncertainty and persistent Middle East tensions could boost the yellow metal, a traditional safe-haven asset in the near term.
On the other hand, ongoing conflicts in the Middle East push energy prices higher and reduce expectations of US interest rate cuts. This, in turn, could weigh on the non-yielding Gold in the near term. “The prospect of higher interest rates as a result of the war could boost government bonds among investors, at the expense of non-yielding precious metals,” market strategists told CNBC.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- The Australian Dollar remains flat for the week as markets await Wednesday's February inflation data, which could cement or challenge expectations for a third consecutive RBA rate hike in May.
- The RBA hiked to 4.10% on March 17 in a back-to-back increase; all four major Australian banks now forecast another 25 basis points in May to 4.35%, with the February CPI the key data point that could confirm or delay the move.
- Friday's final US UoM consumer sentiment reading (consensus 53.8 vs 55.5 prior) and inflation expectations data will provide an update on US demand conditions and the Fed's inflation outlook.
AUD/USD is essentially flat for the trading week, hovering close to 0.7000 after a volatile few sessions that saw the pair swing from above 0.7120 to about 0.6910 and back again. The pair remains caught between two opposing forces: domestic rate hike expectations supporting the Aussie, and broad US Dollar safe-haven demand keeping a lid on any sustained recovery.
Wednesday's February Consumer Price Index (CPI) release at 00:30 GMT is the near-term catalyst. Headline inflation is expected to hold at 3.8% YoY with a flat MoM reading, while the Reserve Bank of Australia's (RBA) preferred trimmed mean measure is forecast to hold at 3.4% YoY. A reading at or above consensus would reinforce the case for a third consecutive rate hike at the May 5 meeting, where all four major banks already expect 25 basis points to 4.35%.
A softer print, particularly on trimmed mean, could give the RBA room to pause and would likely take the Aussie lower. Importantly, this data was collected before the worst of the Strait of Hormuz energy shock fully hit domestic fuel prices, meaning it represents a floor for inflationary pressures rather than a ceiling. Governor Michele Bullock has stressed that "every meeting is live" and that the board would not wait for the full quarterly CPI (due late April) before acting if needed. The RBA's own February forecasts project trimmed mean inflation peaking at 3.7% by mid-2026 and not returning to the 2% to 3% target range until early 2027.
On the US side, the week's remaining data includes Thursday's jobless claims (210K consensus vs 205K prior) and a heavy slate of Federal Reserve (Fed) speakers, followed by Friday's final University of Michigan (UoM) consumer sentiment reading for March (consensus 53.8 vs 55.5 prior) and the closely watched one-year and five-year inflation expectations.
AUD/USD hourly chart
Technical Analysis
In the 1-hour chart, AUD/USD trades at 0.6996. The near-term bias is mildly bearish as price holds below the descending 200-period exponential moving average near 0.7033, keeping the pair capped after repeated failures to sustain gains above 0.7000 earlier in the session. The latest Stochastic RSI recovery from oversold territory, now rising through the mid-range, signals easing downside momentum rather than a clear bullish reversal, suggesting rallies are likely to face selling pressure while the pair remains under the long-term average.
Initial resistance aligns at 0.7000, where recent intraday highs and psychological supply converge, followed by a stronger barrier at the 200-EMA around 0.7033, which defines the upper boundary of the current corrective phase. On the downside, immediate support emerges at 0.6965 from the recent cluster of lows, with a break exposing 0.6950 as the next bearish target. As long as spot holds between 0.6965 support and 0.7033 resistance, the pair risks further probing of lower levels if momentum fails to drive a sustained move above 0.7000.
(The technical analysis of this story was written with the help of an AI tool.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- USD is grabbing support from firm US yields and inflation concerns, limiting upside in NZD/USD.
- Weak Eurozone PMIs and geopolitical tensions reduce demand for risk-sensitive currencies like the Kiwi.
- Rising energy prices reinforce a cautious Fed outlook, capping bullish momentum.
The NZD/USD pair is trading near 0.5840 with a neutral bias, edging slightly higher on the day but failing to gain strong bullish traction as the US Dollar (USD) remains relatively firm.
The Greenback continues to receive support from steady United States (US) Treasury yields and ongoing inflation concerns, particularly as rising oil prices contribute to a cautious outlook from the Federal Reserve. This environment limits the potential for significant gains in the Kiwi, despite occasional improvements in intraday risk sentiment.
In contrast, the New Zealand Dollar is under pressure as a risk-sensitive currency. Global growth concerns, reflected in weaker Eurozone PMI data, are diminishing demand for higher-risk assets. Additionally, geopolitical tensions and elevated energy prices are contributing to a more defensive market tone.
Short-term technical analysis:
On the 4-hour chart, NZD/USD trades at 0.5836. The near-term bias is mildly bearish as the pair holds below both the 20-period Simple Moving Average (SMA) at 0.5842 and the 100-period SMA near 0.5874, with the longer average trending lower and capping the upside. Momentum remains soft, with the 14-period Relative Strength Index (RSI) hovering just below the 50 line, which reinforces the lack of buying conviction after repeated failures to sustain gains above the mid-0.58 zone.
Immediate resistance emerges at 0.5852, where a horizontal cap aligns just above the 20-period SMA, and a break above this area would open the door toward the 0.5870–0.5880 band defined by the descending 100-period SMA. On the downside, initial support appears at 0.5817, followed by a stronger floor at 0.5794, where previous reaction lows converge; a clear drop through 0.5794 would expose deeper retracements toward the lower 0.57s.
(The technical analysis of this story was written with the help of an AI tool.)
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