AUD/USD rose above 0.7200 on Thursday, up more than 1% after the US Dollar hit seven-day lows. The pair rebounded from a daily low of 0.7110 as Japanese action in FX markets weighed on USD.
The US Dollar Index fell 0.91% towards 98.00 after USD/JPY dropped by over 400 pips during the Asian-European session. Reuters reported Japan intervened to support the yen on Thursday, its first official move in nearly two years.
Us Data And Inflation Update
US data showed Q1 2026 growth of 2%, below the 2.3% estimate. AI and data centre spending rose 17.2%, up from 4.3% in Q4 2025.
Core PCE inflation rose 3.2% year-on-year in March, up from 3% and the highest in almost three years. Initial jobless claims were 189K versus 215K expected for the week ending 25 April.
Australia’s CPI rose over 4.1% in Q1 2026, up from 3.6%, with Q1 PPI due next. Markets price a 70% chance the RBA lifts rates to 4.35% on 5 May.
AUD/USD was at 0.7201, with support at 0.7074 and near 0.7059, and the RSI near 61. Resistance levels were cited near 0.7558 and 0.7858.
The Japanese intervention has created a significant shift, weakening the US Dollar and presenting a clear opportunity. This move, rumored to be the largest since 2022, has pushed the US Dollar Index towards the 98.00 level, creating a strong tailwind for currencies like the Australian Dollar. We see this as a primary driver for short-term market direction, overpowering other fundamental data for now.
Rba Meeting And Trading Approach
With the Reserve Bank of Australia’s meeting on May 5th, the market has already priced in a high probability of a rate hike to 4.35%. The recent Australian CPI data showing a jump to 4.1% provides a solid foundation for this expectation. We should consider buying near-term AUD/USD call options to capitalize on the expected hike and bullish momentum, while defining our risk.
The fundamental case for the Aussie is strengthening beyond just central bank policy. Recent data shows iron ore prices have rebounded to over $120 per tonne after a dip earlier in the year, and China’s latest Caixin Manufacturing PMI for April just registered at 51.4, indicating steady expansion. These factors support continued demand for Australia’s key exports and, by extension, its currency.
However, we must remain cautious about the US Dollar’s resilience. The Core PCE inflation reading of 3.2% is the highest in nearly three years, which will keep pressure on the Federal Reserve to maintain its hawkish stance. A strong US ISM Manufacturing report next week could quickly reverse some of the dollar’s recent losses, making it prudent to protect any long AUD positions.
When we look back at the last major interventions by Japan in late 2022, we saw that the effects could be powerful but temporary if not supported by a shift in interest rate differentials. The Fed’s commitment to fighting inflation at that time eventually led to a resumption of USD strength. This history suggests that the current window of dollar weakness might not last indefinitely if US inflation remains sticky.
Given the surge in the AUD/USD past 0.7200, implied volatility in the options market has likely increased. This makes strategies like bull call spreads attractive, as they can reduce the upfront cost of buying options. We could structure these trades to target the next resistance level near 0.7558 mentioned in the technical outlook.
