The Australian dollar has emerged as one of the forex market's most compelling stories in early 2026, rallying strongly from its year-to-date low of 0.6420 to test critical resistance levels above 0.7100.[2][3] However, recent price action reveals a more complex picture. As AUD/USD consolidates near 0.7120, traders are increasingly focused on the critical support levels that could determine the pair's next major move. The interaction between these support zones and key fundamental drivers—particularly the Reserve Bank of Australia's hawkish stance and broad US dollar weakness—will be pivotal in shaping the currency pair's trajectory over the coming weeks.[1][3]
Understanding The Current Price Structure
The daily chart reveals that AUD/USD is now positioned in a fascinating technical zone where multiple factors converge. The pair recently bounced from a significant support area around 0.7000, which served as both a psychological level and a prior resistance point from January.[4] Above this sits the 0.6943 support level, which represents the highest level from September 2024.[1] These support levels are critical because they define the technical floor that bulls must defend to maintain their near-term advantage.
On the resistance side, traders are laser-focused on 0.7150, which has proven to be a major barrier preventing sustained breakouts.[3] Beyond this level, immediate resistance sits at 0.7158, with further resistance at 0.7283 and the more distant cap at 0.7661.[2] The recent rally has positioned AUD/USD to test these upper levels, but consolidation at current prices suggests a period of healthy digestion before another push higher.
The Inflation-rate Divergence Story
The fundamental backdrop supporting Australian dollar strength has never been clearer. Australia's latest inflation report showed headline consumer price inflation remaining elevated at 3.8% in January, exceeding the median estimate of 3.7%.[5] Additionally, the trimmed mean inflation rose to 3.4% from 3.3%, signaling persistent price pressures across the broader economy. This robust inflation backdrop has provided powerful ammunition for the Reserve Bank of Australia to maintain its hawkish monetary policy stance.[2][3]
This creates a compelling divergence with the Federal Reserve. While the RBA is either hiking or maintaining a cautious pause in its policy path, the Fed has left rates unchanged between 3.50% and 3.75% and signaled potential rate cuts later in 2026 if inflation continues declining.[5] This interest rate differential is fundamental to understanding AUD strength. When central banks diverge on policy, capital flows follow the higher yields, and the Australian dollar benefits from this positive rate differential against the weakening US dollar.
Technical Momentum And Moving Average Support
From a technical perspective, AUD/USD has established an impressive structure that supports further upside despite recent consolidation. The pair is trading above the critical 50-day, 100-day, and 200-day exponential moving averages, all of which are trending higher and forming a rising medium-term channel.[1][2] This alignment of moving averages above current price represents genuine technical strength and suggests that any pullback into this area would find solid support.
The Relative Strength Index and MACD indicators have shown continued upward momentum in recent sessions, reinforcing the bullish bias.[5] Additionally, the pair remains above the Supertrend indicator and Ichimoku cloud, both of which are used by technical traders to identify strong trend conditions. The 50% Fibonacci retracement level at 0.6784 and the 61.8% retracement at 0.6699 provide additional support zones if the pair experiences a more significant pullback.[2]
Trading Implications And Risk Management
For traders seeking to capitalize on AUD/USD strength, buying strategies above 0.7150 with targets toward 0.7200 to 0.7325 offer a compelling risk-reward profile.[3][5] However, successful trading requires disciplined risk management. Stop-losses should be positioned below 0.6950 to protect against a break below this critical support level.[1][3] The timeline for such moves is likely measured in days to weeks rather than months, making this a medium-term tactical opportunity.
Bearish traders, meanwhile, should recognize that shorting above 0.7150 becomes increasingly risky given the technical structure and fundamental backdrop. Any bearish trades should focus on breaks below 0.7000 as confirmation of weakness.[3][5] The key is recognizing that elevated Australian inflation and an expected RBA hiking cycle create a hostile environment for significant AUD depreciation without a major risk-off event.
WHAT'S NEXT FOR AUD/USD
The immediate catalyst will come from the US jobs report, with initial and continuing jobless claims data set for release on Thursday, February 27.[5] Weaker-than-expected employment data could accelerate the Fed rate cut narrative, providing additional tailwinds for AUD/USD. Beyond this, traders should monitor any RBA commentary on future rate decisions and broader risk sentiment indicators, as global trade uncertainty has shown capacity to shake the pair from its uptrend.
The support levels discussed—particularly 0.7000 and 0.6950—represent the technical line in the sand. As long as AUD/USD remains above these levels with moving averages supporting price from below, the bullish case remains intact. Break below these supports would trigger a reassessment and potentially open the door to deeper correction toward the 0.6700 area.