AUD: Testing Resistance on Strong Inflation - OCBC

Australia's latest inflation data came in higher than expected, heightening market concerns that the Reserve Bank of Australia (RBA) may resume rate hikes. OCBC strategists Frances Cheung and Christopher Wong noted that while their base case is that the easing cycle has ended, upside inflation risks keep the possibility of renewed tightening alive. Supported by this hawkish repricing, AUD/USD is trading around 0.71872, testing key technical resistance.

**Inflation surprise reinforces hawkish stance**

According to OCBC, the strong inflation print is the key driver behind AUD's near-term strength. Strategists believe the data makes it harder for the RBA to pivot dovish at upcoming policy meetings, leaving the option of holding rates steady—or even hiking again—on the table. Markets are now repricing the RBA's rate path, and the resulting yield advantage is providing solid support for the Australian dollar.

**Technical focus shifts to resistance zone**

After breaking through multiple resistance levels, AUD/USD now faces stronger overhead resistance. Market signals point to immediate resistance around 0.7085; a decisive break and close above this level could open the door for further upside. On the downside, support near 0.6880 is viewed as a key near-term floor—as long as the pair holds above this level, the short-term upward momentum is expected to persist.

**Outlook hinges on policy signals and USD dynamics**

OCBC analysts added that while AUD enjoys a yield advantage, the US dollar remains a critical variable. With upside inflation risks in the US still unresolved and new tariff impacts looming, the dollar is likely to stay firm in the near term, potentially capping AUD's advance. Therefore, whether AUD can sustain its strength will depend not only on Australia's robust economic and inflation data but also on Federal Reserve policy signals and shifts in global risk sentiment.