This hawkish outlook has been reinforced somewhat by a warning from RBA Deputy Governor Andrew Hauser that as long as oil prices keep rising, we might see a spike in inflation – with headline CPI possibly going over the 4% mark.
AUD/USD Price Prediction: Will we see that 0.7096 gap fill before we shoot up to 0.7200?
Technically the pair is currently just going through a bit of a routine pull back after a strong rejection at the 0.7182 swing high. Many of the pro traders I know are viewing this minor pull back to the 0.7129 level as just a healthy breather after all the excitement of the recent rally.
A key area that bulls are keeping a close eye on is that 0.7096 to 0.7069 zone – which just so happens to be where that significant Fair Value Gap is located and lines up with a 0.382 Fibonacci retracement level.
As long as the pair stays above the 0.7068 support level – it’s still basically business as usual for bulls with the chance of some pretty serious upside targets up towards 0.7222 major resistance on the cards.
Policy Divergence and Geopolitical “Safe-Haven” Dynamics
Fundamentally the Australian Dollar is still very much anchored in that stark policy divergence between the RBA and the Federal Reserve. While the Fed is facing some pretty cool labour market signals, the RBA is wrestling with an economy that’s growing at a pretty hot 2.6% y/y and with limited spare capacity – which has seen AU-US yield spreads get pretty large for the first time since 2022.
The ongoing tensions in the Middle East have added another layer of complexity – with the US-Israel-Iran conflict still sending shockwaves through the energy markets.
