Aussie has staged a remarkable breakout today, surging broadly higher to clip a near four-year peak against Dollar. AUD/USD is now knocking on the door of a critical resistance zone at 0.72. Firm break above this level wouldn’t just be a win for the bulls—it would signal strong underlying momentum that could pave the way for a climb toward 0.77 or even a return to 0.80 handle.
This aggressive rally isn’t happening in a vacuum. It is being fueled by a violent repricing of interest rate expectations. Global markets have suddenly realized that the RBA is pivoting toward a much more aggressive tightening cycle than anyone predicted just a month ago. The “patience” stance is being replaced by a sense of tactical urgency.
Previously, the “consensus” roadmap was clear and cautious. Following the 25bp hike to 3.85% in February, the RBA was expected to hold steady on March 17. The plan was to wait for the comprehensive quarterly CPI data in late April before considering a follow-up move in May. It was a “wait-and-see” approach designed to protect the economy.
However, the outbreak of the Iran war has shredded that calculus. The geopolitical shock sent oil prices into a frenzied spike to $120 earlier this week. While prices have pulled back, they remain stubbornly elevated above $80—carrying a “war premium” of roughly $20 compared to pre-conflict levels. For a central bank fighting inflation, this is an external shock that cannot be ignored.
The RBA could now view waiting until May as a luxury it simply cannot afford. There is a growing fear within the Board that if inflation expectations become “unanchored” due to this energy shock, the genie will be impossible to put back in the bottle. To prevent inflation from running further away, the RBA could feel compelled to act as an “inflation hawk” right now.
The data justifies this anxiety. Headline CPI sat at 3.8% in January, but the real concern lies in the Trimmed Mean, which rose to 3.4%. Both figures are well above the RBA’s 2–3% target range. More importantly, the rise in the Trimmed Mean—which strips out volatile items like petrol—proves that inflation is not just a “fuel story.” It is becoming “sticky” and embedded across the broader service economy.
The messaging from Martin Place has been unusually blunt. Deputy Governor Andrew Hauser has led the charge this week, using his platform to describe high inflation as “toxic.” He cautioned that the Middle East conflict could push domestic prices even higher, emphasizing that the March 17 meeting will involve a “very genuine debate” about hiking. In central-bank-speak, a “genuine debate” is a clear warning that a hike is on the table.
The banking sector has heard the message loud and clear. NAB and Westpac official teared up their old playbooks. Both banks now forecast back-to-back 25-basis-point hikes in both March and May.
Technically, AUD/USD’s up trend from 0.5913 (2025 low) resumed today and it will soon be testing a key cluster resistance zone at around 0.72. That zone includes 100% projection of 0.5913 to 0.6706 from 0.6420 at 0.7213, and 61.8% retracement of 0.8006 (2021 high) to 0.5913 at 0.7206. Decisive break there would pave the way to 161.8% projection at 0.7703 or even further to 0.8006 high.
