AUD/USD pared back Wednesday’s rally and settled near 0.7050 after rising by more than 1% earlier. It reached a three-week high around 0.7085 following news of a two-week US–Iran ceasefire, then slipped into a tight range ahead of the Asian open.
The ceasefire includes Iran reopening the Strait of Hormuz, which reduced demand for the US Dollar and lifted risk-sensitive currencies. Reports say neither side has committed to the underlying 10-point framework, and the deal is being treated as limited to the two-week window.
Australia Data Outlook
Australia has little domestic data due for the rest of the week. The Reserve Bank of Australia raised the cash rate by 25 basis points to 4.10% at its March meeting, and markets are pricing a possible further move at the May decision as higher energy costs sustain inflation pressure.
US releases take focus, with Thursday due to bring the February core PCE Price Index and fourth-quarter GDP. Friday includes March CPI data and the University of Michigan consumer sentiment and inflation expectations surveys.
On a 15-minute chart, AUD/USD trades at 0.7047 and remains above the 200-period EMA at 0.7005. The Stochastic RSI is near 71, with support still centred on 0.7005.
We are seeing a familiar pattern of uncertainty in the AUD/USD, now trading near 0.6615. Looking back at the events of 2025, we recall how a temporary US-Iran ceasefire caused a sharp, but ultimately faded, rally towards 0.7085. That price action taught us to question the durability of geopolitical headlines and not chase initial spikes.
Policy Divergence And Volatility
The focus now, much like it was then, is on central bank policy divergence. The Reserve Bank of Australia is holding its cash rate at 4.35%, and with the latest Q1 2026 inflation data coming in stubbornly high at 3.8%, the market has pushed back expectations of any rate cuts until late in the year. This provides a fundamental level of support for the Australian dollar.
On the other side of the pair, the US Federal Reserve is signaling a data-dependent path, with traders hanging on every inflation print. The most recent core PCE reading for March 2026 came in at 2.7%, slightly above forecasts and delaying the timeline for the Fed’s first anticipated rate cut. This keeps the US dollar firm and caps any significant upside for the AUD/USD.
Given this tension, derivative traders should consider strategies that benefit from potential volatility around key data releases, especially the upcoming US CPI report. We see one-month implied volatility for AUD/USD hovering around 9.5%, which is not excessively high given the uncertain macroeconomic backdrop. Purchasing straddles or strangles ahead of the CPI data could be an effective way to position for a significant price move, regardless of the direction.
The technical picture also suggests a period of consolidation before a larger move. While the pair is currently caught in a range, any break driven by surprising inflation data could be swift and significant. We remember from 2025 how quickly sentiment can shift, turning a short-term rally into a pullback when the underlying fundamental story reasserts itself.
