The Aussie Dollar continues to trade in tandem with the broader trends in the risk-associated universe, all amid a fragile geopolitical scenario in the Middle East. Meanwhile, persistently elevated inflation in Oz and the RBA’s cautious bias are expected to underpin the current positive outlook for the Aussie Dollar for now.
The Australian Dollar (AUD) maintains a positive attitude on Tuesday, motivating AUD/USD to hit fresh four-day highs around 0.6950, while opening the door at the same time to a potential new visit to the psychological 0.7000 barrier in the relatively short-term horizon.
The continuation of the pair’s auspicious start to the week follows another bearish leg in the US Dollar (USD) in a context of heightened caution ahead of the imminent deadline from President Trump on Iran, which is expected in the very early hours of Wednesday in Europe.
Australia: holding up, but losing some edge
Australia’s healthy fundamentals continue to underpin the Aussie, although this scenario has started to show some cracks.
The broader picture, however, remains pretty unchanged, as the economy is outperforming almost all its peers, inflation continues to run hot across all measures, and the Reserve Bank of Australia (RBA) maintains a cautious (hawkish) stance.
Now, back to those cracks: the final prints of the Purchasing Managers’ Index (PMI) receded below the 50 threshold in both the manufacturing and services sectors in March, suggesting that the domestic business activity is losing some traction. Trade, on the other hand, looks robust after the February surplus hit levels last seen in the summer of 2025 at A$5.686 billion.
Regarding growth, the Q4 Gross Domestic Product (GDP) expanded by 0.8% QoQ and 2.6% over the last twelve months, while the jobs market is cooling slowly after the Unemployment Rate ticked higher to to 4.3% and the Employment Change increased by 48.9K.
Inflation, however, remains the hot issue. That said, the latest Consumer Price Index (CPI) rose 3.7% from a year earlier, the Trimmed Mean gained 3.3% YoY, and the Weighted Median ticked higher by 3.5% on a yearly basis. Disinflation looks like a fact, but it is taking its time.
The RBA acknowledged that there is still a job to be done, at the time when officials expect consumer prices to return to the bank’s target not before mid-2028.
China: stabilising, but lacking impulse
China is not acting like a tailwind for AUD; it has become some kind of a stabilising force.
The Chinese economy grew 4.5% in Q4 2025, Retail Sales expanded 2.8% YoY in the first two months of the year, and trade conditions remain firm. However, the picture looks more mixed the deeper we go.
Indeed, PMIs released by the official National Bureau of Statistics (NBS) remained in contraction, while private surveys like RatingDog cooled somewhat in March.
Regarding inflation, the CPI rose 1.2% YoY and Producer Prices dropped -0.9% YoY, allowing the People’s Bank of China (PBoC) to keep its Loan Prime Rates (LPR) unchanged at 3.00% and 3.50% for the one-year and five-year tenors.
RBA: bias intact, timing in focus
In the latest RBA meeting, a tight 5–4 vote to hike the Official Cash Rate (OCR) by 25 bassis points to 4.10% highlighted just how finely balanced things are.
The message remained the same: capacity constraints are still there, while higher crude oil prices would most likely add to inflation pressure in the short term. Following the bank’s decision, Governor Michele Bullock was clear, as she highlighted that excess demand is still the core issue.
The debate now is all about timing, as some policymakers want to pause and assess the impact of external shocks.
On this, the latest Minutes showed how uncertain the outlook has become. After two rate hikes this year, policymakers acknowledged they have limited visibility on where rates are headed next, with the evolving geopolitical situation making the path forward harder to gauge with any confidence.
Markets, in the meantime, are still leaning towards further tightening, with nearly 59 basis points pencilled in by year end.
AUD positioning: crowded longs, rising vulnerability
Non-commercial net longs in AUD have been steadily increasing for a third consecutive week, reaching around 81.5K contracts in the week ending on March 24. That is a meaningful build-up in bullish exposure, extending the trend already visible in prior weeks.
What makes this more interesting is the continued disconnect with price action. AUD/USD has drifted lower over the same period, slipping from above 0.7100 to the sub-0.6900 area. This widening divergence suggests that investors are holding onto a constructive medium-term view, likely tied to the domestic macro backdrop and China stabilisation hopes, but without near-term price validation.
In addition, open interest has gathered fresh traction, which points to fresh positioning being added, all adding further conviction to the build-up, even as price fails to follow through.
The implication is increasingly asymmetric: the AUD is becoming a crowded long in a market that is not rewarding that view, raising the risk of a sharper unwind if external conditions deteriorate. In the absence of a clear catalyst to lift AUD/USD, positioning is starting to look like a vulnerability rather than support.
AUD/USD: What may happen next
Base case
AUD/USD stays below 0.7050 and trades with a weak tone since the USD is strong and geopolitics are in charge.
Bull case
A strong improvement in global risk sentiment or worse US data might send spot back over 0.7100, which would confirm the lengthy gain.
Bear instance
If the USD becomes stronger or if China’s economy or risk sentiment gets worse, it might cause a squeeze that sends the price into the 0.6800 area.
What to look for
Near term: the key things that affect the market are the US Dollar’s movements, risk sentiment, and geopolitical news. At home, housig data is expected toward the end of the week. In the US, the release of the FOMC Minutes and inflation tracked by the CPI should gather all the attention.
Risks: If China’s economy slows down, oil prices go up, or the Fed changes its mind, the balance may swiftly flip.
Technical corner
In the daily chart, AUD/USD trades at 0.6946. The near-term bias is mildly bullish as spot holds above the 100-day Simple Moving Average (SMA) around 0.6840, while also trading well above the rising 200-day SMA near 0.6690, which underpins the broader uptrend. Price hovers just under the 23.6% Fibonacci retracement at 0.6976, measured from the 0.6421 low to the 0.7147 high, keeping the pair in a shallow corrective phase rather than a full-fledged reversal. The Relative Strength Index (RSI) around 47 stays below the 50 midline but is off oversold territory, hinting at fading downside momentum without a strong impulse yet from buyers. The Average Directional Index (ADX) easing toward the mid-20s reflects waning trend strength after the prior advance, consistent with consolidation above key averages rather than aggressive selling.
Immediate support is seen at 0.6833, reinforced by the nearby 50% Fibonacci retracement at 0.6784, with a break there exposing the 200-day SMA around 0.6690. Down from here emerge 0.6660 followed by 0.6593, forming a deeper demand zone that would come into play if the current structure fails. On the topside, initial resistance stands at the 0.7147 swing high, just beneath the horizontal barrier at 0.7158; a daily close above this band would reopen the way toward 0.7283 and then 0.7661. As long as the pair holds above 0.6897 and the rising medium- and long-term SMAs, dips are likely to attract bids within this range-bound but upward-leaning configuration.
(The technical analysis of this story was written with the help of an AI tool.)
Bottom line: supported, but vulnerable
The Aussie still has a good macro narrative behind it, and the RBA isn’t backing down.
But this isn’t a good setting for a bull market.
When risk is high, the AUD does well. The US Dollar takes control when things become more volatile.
The bias is still in favour, but the risks are beginning to shift to the negative in the near run.
