- AUD/USD jumps to near 0.7110 as the AUD outperforms amid hawkish RBA expectations.
- RBA’s Bullock stated that the central bank could raise interest rates to bring inflation back to the 2% target.
- Surging US factory gate inflation could diminish near-term dovish Fed expectations.
The AUD/USD pair trades 0.2% higher to near 0.7110 during the Asian trading session on Tuesday. The Aussie pair trades firmly as the Australian Dollar (AUD) outperforms its peers, following hawkish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock on the monetary policy outlook.
“Board uncertain if financial conditions are sufficiently restrictive to return inflation to midpoint of target in a reasonable timeframe,” Bullock said earlier in the day. Bullock warned of rising inflationary pressures amid the ongoing war in the Middle East, and the central bank is well-positioned to respond.
In the February meeting, the RBA hiked its Official Cash Rate (OCR) by 25 basis points (bps) to 3.85%, citing upside inflation risks, and kept the door open for further monetary policy tightening.
Meanwhile, the US Dollar (USD) trades broadly firm as its safe-haven demand has increased amid the war between the United States (US), Israel, and Iran.
In the US, soaring inflation at the factory level is expected to strengthen market speculation that the Federal Reserve (Fed) will hold interest rates steady at their current levels in the near term. The ISM Manufacturing PMI report showed on Monday that the sub-component Prices Paid – which tracks changes in prices paid for inputs such as labor and raw materials – soared to 70.5 against estimates of 59.5 and the previous reading of 59.0.
AUD/USD technical analysis
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AUD/USD climbs to near 0.7110 in the Asian trade. The near-term bias is bullish as price holds above the rising 20-day Exponential Moving Average (EMA), which underpins a sequence of higher closes seen over recent weeks. The pair is consolidating just under recent highs, suggesting a pause rather than a reversal while the 20-day EMA continues to track beneath spot.
The 14-day Relative Strength Index (RSI) above 60.00 stays in positive territory, indicating persistent upside momentum without an overbought signal at present.
Initial support emerges at 0.7050, close to the 20-day EMA, with a break below exposing deeper pullback risk toward the psychological level of 0.7000. If that zone fails, focus would shift to the February 6 low around 0.6900 as the next downside level. On the topside, the three-year high around 0.7150 is the immediate resistance, and a daily close above would open the way toward 0.7200. As long as price holds above 0.7050, dips are more likely to attract buyers than signal a sustained bearish reversal.
