Australian Dollar strengthened following January’s stronger-than-expected CPI data, but the move has resembled a “steady climb” rather than a “breakout surge”. While markets interpreted the firm headline and core readings as reinforcing the hawkish stance of the RBA, positioning remains measured.
One reason is that a May rate hike is already largely priced in. After the RBA’s hawkish increase earlier this month, traders had moved quickly to factor in another step. The latest CPI print confirms that narrative but does not materially extend it. For further upside momentum, markets would likely need to price tightening beyond May. That, however, may depend more heavily on the comprehensive Q1 quarterly inflation report due April, rather than the monthly indicator.
As RBA economic analysis chief Michael Plumb noted yesteday, it will take time to understand the properties and seasonal patterns of the new monthly data. For now, policymakers continue to place greater weight on quarterly measures, limiting the immediate impact of monthly fluctuations.
Global uncertainty also tempers enthusiasm. Ongoing trade tensions, fresh US tariff measures, and persistent US–Iran geopolitical risks act as a natural ceiling for risk-sensitive currencies like the Aussie.
Still, the broader tone for Aussie remains bullish. With inflation holding above target and core measures edging higher, the policy bias is clearly toward further tightening, keeping AUD underpinned on dips.
Technically, AUD/CAD has returned to test 0.9697 resistance level with today’s bounce. Decisive break would confirm resumption of the broader rally from the 0.8440 (2025 low) and open the way toward 261.8% projection of 0.8902 to 0.9225 from 0.9055 at 0.9901.
However, failure to clear that resistance cleanly could invite consolidation. Break below 0.9597 support would would bring deeper correction to 55 D EMA (now at 0.9439) first.
While GBP/AUD shows waning downside momentum as daily MACD divergence emerges, there is no clear sign of bottomg yet. The downtrend from 2.1643 (2025 high) high remains intact, with next target at 200% projection of 2.0848 to 1.9984 from 2.0472 at 1.8744.
However, firm break of 1.9327 resistance will indicate short term bottoming, and bring stronger rebound towards 55 D EMA (now at 1.9674).
