AUD/USD surges to multi-year highs as rising inflation puts the RBA back in focus. These are the key levels to watch

AUD/USD has broken to its highest level since 2022. Several factors are driving the move:

• Oil-driven inflation from the Middle East conflict is pushing Australian CPI expectations above 4%
• RBA rate hike odds have surged to around 75% for the March 17 meeting, up from below 30% earlier in the week
• The US dollar is weakening as risk appetite recovers and markets await today’s US CPI release
• Rate divergence is widening, with markets now pricing in up to three RBA hikes this year while the Fed remains on hold

The technical picture is now catching up to the fundamentals.

AUD/USD: the weekly chart

When we last covered AUD/USD in late February, the pair was trading near three-year highs. Since then, the breakout has accelerated.

On the weekly timeframe, AUD/USD has broken above both the 200 simple moving average and the descending trendline that had kept price in a downtrend since July 2022. That breakout triggered a significant push higher, and price is now testing an important resistance zone sitting just below 0.72.

• On Balance Volume (OBV) has been rising consistently throughout this trend, confirming that buying pressure is supporting the move
• RSI remains elevated, showing that momentum behind the rally is still strong

A sustained break above the 0.72 resistance zone could open the door to a much larger move, given how long this level has capped price on the higher timeframe.

AUD/USD: the daily chart

Zooming into the daily timeframe, AUD/USD is breaking above the high-timeframe resistance zone, which also confluences with the range high of a range the pair has been trading within since the beginning of the year. There are several key levels to watch here:

• Range high / resistance zone (just below 0.72): If price can hold this level as support, that could be a strong signal of continued upside strength
• Trendline 2 + range low confluence: To the downside, the ascending trendline labelled “Trendline 2” could potentially converge with the lower boundary of the previous range. This area also aligns with the 50 EMA, adding further confidence to this support zone if price would break lower
• 0.675: If selling pressure escalates and price breaks back into the previous range and below, the next area of interest sits around 0.675, a level that remains untested as support
• RSI divergence: It is worth noting that the RSI is showing signs of bearish divergence, which could suggest that momentum is beginning to slow even as price pushes higher. This does not necessarily mean a reversal is imminent, but it warrants a cautious approach

AUD/USD: the 4-hour chart

On the 4-hour timeframe, the first immediate support sits at around 0.714, where the previous range high, the high-timeframe resistance zone, and a local trendline all converge. This could be an area where bulls look to defend the breakout.

• If 0.714 holds as support, it would reinforce the bullish case and suggest the breakout has legs
• If it fails, focus shifts lower to the area between the 0.618 and 0.5 Fibonacci retracement levels, where the 4-hour 20 and 50 EMAs also sit. This confluence zone could provide the next opportunity for buyers to step in
• OBV shows that buyers have been supporting this move, but there are signs of weakening momentum
• RSI is showing a double-top pattern, which, combined with the softening OBV, suggests traders could approach this area with some caution

The broader trend remains bullish, but the short-term signals suggest the pair could pull back before the next leg higher.

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