AUDUSD Supported by Stronger-Than-Expected Inflation, Though Dovish RBA Governor Caps Upside Momentum

AUDUSD climbed to a two-week peak at 0.7116 in early Wednesday trading, supported by the release of Australia’s latest CPI figures.

Inflation remained elevated in January, holding steady at 3.8% year-on-year, while core inflation printed at 3.4%, marking its highest level in 16 months. Both readings exceeded market forecasts of 3.3% for headline and 3.7% for core inflation, reinforcing expectations of another rate increase. This follows the Reserve Bank of Australia’s 25 basis point hike to 3.85% earlier this month, a move that reversed its prior easing cycle after three rate cuts in 2025.

The January data aligns with the central bank’s projections that inflation could accelerate to 4.2% in the first half of the year, with core inflation seen rising toward 3.7%, amid strengthening economic growth and a persistently tight labor market.

However, the initial bullish reaction faded after relatively dovish remarks from RBA Governor Bullock, who signaled that policymakers are likely to remain on hold at the March meeting. These comments tempered rate hike expectations and triggered a pullback, erasing roughly half of the post-data gains.

From a technical perspective, the broader daily chart structure remains constructive, with price action consolidating beneath the fresh three-year high at 0.7147. The overall bullish outlook is expected to stay intact while the pair holds above the 0.70 area, which represents a key psychological level, the recent range floor, and lies near the 50% retracement of the 0.6896/0.7147 advance.

Conversely, a sustained break below the 0.70 handle would shift the near-term bias and open the door for a deeper correction, exposing the next downside trigger at 0.6870, the February 6 higher low.

Res: 0.7116; 0.7147; 0.7207; 0.7265
Sup: 0.7043; 0.7000; 0.6975; 0.6896