The Australian Dollar is supported by hawkish domestic conditions but faces pressure from global risk aversion linked to the Iran War. AUD/USD support is seen around 0.69 to 0.70.
After remarks from Reserve Bank of Australia Deputy Governor Andrew Hauser that the economy was running beyond its sustainable capacity, markets have priced in a back-to-back 25-basis-point rise. This would take the RBA cash rate to 4.10% at the 17 March policy meeting.
RBA Governor Michele Bullock has referred to the Iran War as a double-edged factor, prompting a high-alert, data-dependent policy approach. The outlook for AUD/USD is tied to whether the Federal Reserve sounds net dovish and whether the Chinese yuan continues to strengthen.
The article states it was produced with the help of an artificial intelligence tool and reviewed by an editor.
We see the Australian dollar is caught between our own hawkish central bank and a worsening global risk environment due to the Iran war. With markets fully pricing in a rate hike to 4.10% at tomorrow’s RBA meeting on March 17th, the focus will be on their future guidance. This tension suggests playing volatility, rather than direction, may be the prudent approach for the coming weeks.
The RBA’s hawkish stance is backed by the latest data showing inflation remains sticky at 3.6%, well above their target band. However, we also saw the unemployment rate tick up to 4.1% last month, giving the board a reason for caution. This uncertainty makes outright directional bets risky, favouring options strategies like straddles that can profit from a sharp move in either direction post-announcement.
We should remember the sharp downturn back in the third quarter of 2025 when global supply chain fears overshadowed a similarly hawkish RBA. During that period, AUD/USD broke below key support levels despite positive domestic rate differentials. This history suggests traders should consider buying downside protection, such as put options below the 0.6900 level, even if the RBA delivers a hawkish hike.
Support around the 0.69-0.70 level is highly dependent on a dovish-sounding Federal Reserve and a strong Chinese Yuan. With recent US inflation data cooling to 2.9%, the Fed may have room to soften its tone, which would weaken the US dollar. The Yuan’s recent appreciation provides a tailwind, but this can reverse quickly on any negative geopolitical news.
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