The Australian dollar halted a three-day advance on Thursday, slipping back into consolidation after failing to hold above the 0.7200 threshold. The AUD/USD pair touched an intraday high near 0.7200 before retreating to close around 0.7165, leaving the near-term tone subdued.
Limited support from domestic data and RBA outlook
Australian labor market data offered only modest support. March employment rose by 17,900 jobs, below expectations for 20,000 and well under February’s 49,700 gain. The unemployment rate held steady at 4.3%, while consumer inflation expectations climbed to 5.9% from 5.2%.
The figures did little to shift expectations around the Reserve Bank of Australia’s policy path. Markets still see the central bank maintaining a firm stance after lifting the cash rate twice in the March quarter to 4.10%, citing excess demand and persistent inflation. Westpac continues to project three additional rate hikes this year, which would take the benchmark rate to 4.85%.
The broader macro backdrop has turned more complex. The International Monetary Fund now forecasts Australian GDP growth at 2.0% for 2026, while revising inflation higher to 4.0%, above the pace expected in many advanced economies. Those projections reinforce the view that tighter policy may extend well into 2026.
With no major local data due on Friday, short-term direction for AUD/USD is likely to hinge on global developments rather than domestic releases.
Middle East tensions and strait of Hormuz blockade
External risk remains centered on the Middle East. Washington has confirmed ongoing talks aimed at securing a ceasefire between Israel and Lebanon, but progress is seen as fragile and uneven.
At the same time, the conflict with Iran has escalated into a new phase. A U.S.-led naval blockade of Iranian ports began on April 13, 2026, after ceasefire negotiations broke down. The strategy marks a shift from direct military engagement toward economic pressure by targeting Iran’s maritime trade.
While U.S. officials say the blockade is not intended to interfere with vessels heading to non-Iranian ports, the effective closure of the Strait of Hormuz to much commercial traffic is keeping energy prices elevated and adding strain to global supply chains. As of April 16, U.S. Central Command reported that 14 ships had complied with orders to turn back from Iranian ports.
Analysts warn that any protracted disruption in one of the world’s most important shipping lanes could feed into higher global inflation, particularly through energy and freight costs.
Federal Reserve cautious as oil and uncertainty rise
In the United States, the Federal Reserve is holding rates steady while reassessing risks from both inflation and geopolitics. At its March meeting, the Fed kept the federal funds target range at 3.5% to 3.75%.
New York Fed President John Williams recently projected U.S. GDP growth of 2% to 2.5% for the year but highlighted heightened uncertainty tied to the Middle East conflict and energy prices. Federal Reserve Governor Stephen Miran signaled he may trim his forecast for rate cuts in 2026, citing underlying inflation pressures that were evident even before the latest run-up in oil.
Higher-for-longer U.S. rates, if they materialize, could limit upside in higher-yielding currencies and keep pressure on the Australian dollar when risk sentiment deteriorates.
Commodities: iron ore prices supportive but vulnerable
Australia’s key export, iron ore, is providing some offsetting support. Prices for delivery to China are trading near $105 per ton, the highest since January 2026. Fitch Ratings recently raised its 2026 iron ore forecast to $95 per metric ton, pointing to higher production costs as an underlying floor.
However, analysts doubt that prices above $100 per ton can be sustained as global supply ramps up. A pullback in iron ore would remove an important tailwind for the Australian dollar, particularly if global growth slows under the weight of higher energy costs and prolonged geopolitical risk.
Intraday picture: overbought signals and fragile momentum
On short-term charts, AUD/USD remains under mild pressure. The pair traded around 0.7164 late in the session, below the opening level of 0.7174, underscoring fading momentum after the recent rally.
A high Stochastic RSI reading near 89 suggested overbought intraday conditions, hinting that further gains could be capped unless the pair can reclaim and hold above the day’s open. Immediate resistance is clustered around 0.7174, and a clear break above that level would be needed to restore near-term upward traction.
Without nearby supporting technical levels, a further loss of buying interest could trigger a deeper intraday pullback.
Daily trend: bullish bias intact despite correction risk
From a broader daily perspective, AUD/USD still trades above key moving averages, preserving a constructive medium-term bias. The pair is hovering near 0.7163, comfortably above the 50-day exponential moving average at 0.6995 and the 200-day EMA at 0.6770.
The daily Stochastic RSI stands at an elevated 96, a signal that momentum is stretched and that a mild correction is increasingly likely. Even so, price stability above the 50-day and 200-day EMAs points to underlying trend strength.
Initial support sits near the 50-day EMA around 0.6995, with stronger backing near the 200-day EMA at 0.6770. As long as the pair holds above these levels, any short-term pullbacks are likely to encounter renewed demand from traders looking to re-enter the prevailing uptrend.
Outlook: extended rally faces test after 350-pip surge
The Australian dollar’s recent hesitation reflects a recalibration by markets weighing solid but unspectacular domestic data against a more volatile external backdrop. The failure to sustain levels above 0.7200 suggests that the optimism behind the more than 350-pip advance from late March may be running into resistance.
Technically, AUD/USD appears overextended after that sharp climb. The hourly RSI has retreated from overbought territory, and price action is testing the upper boundary of an ascending channel. That combination signals that the current bullish leg may be approaching a pause rather than an immediate extension.
A decisive break below the 0.7120 region would open the way for a deeper retracement toward the 50-day moving average around 0.7033. For the upside to resume, traders will likely look for a sustained move back above 0.7200, supported by either an improvement in global risk sentiment, firmer commodities, or clearer guidance on future RBA policy.
For deeper macro context influencing AUD and crypto, explore Toobit’s insights on fiscal policy and how it works today.
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