Published: 17 March 2026,06:38
Daily Market Analysis New
*The Australian Dollar has gained ~6% in 2026, supported by expectations that the Reserve Bank of Australia will resume tightening.
*Markets expect a 25 bps hike to 4.10%, driven by persistent inflation and hawkish signals from policymakers like Andrew Hauser.
*Disruptions at the Strait of Hormuz are boosting oil prices, adding imported inflation pressure and supporting further AUD upside.
Market Summary:
The Australian dollar has emerged as the standout performer among G10 currencies in 2026 to date, gaining approximately 6 percent against its U.S. counterpart and reaching multi-month highs near 0.7185. This resilience persists despite ongoing geopolitical volatility tied to Middle East tensions, underscoring the strength of domestic policy drivers over external headwinds. The currency’s outperformance stems primarily from a marked hawkish shift in Reserve Bank of Australia policy expectations, contrasting sharply with easing cycles anticipated at other major central banks including the Federal Reserve .
The Monetary Policy Board concludes its two-day meeting today, with the cash rate announcement scheduled for 2:30 pm AEDT. Market pricing points decisively toward a 25 basis point hike to 4.10 percent, which would mark the first instance of a G10 central bank resuming its tightening cycle . A Reuters poll shows economists widely expect the March increase, with major banks including Westpac and NAB now forecasting additional tightening extending into May. Deputy Governor Andrew Hauser’s recent hawkish commentary—warning that oil price shocks tied to the Iran conflict pose upside risks to inflation—triggered a significant repricing, with futures-implid odds of a March hike jumping from approximately one-third to more than two-thirds.
Inflation remains the central concern, with headline CPI at 3.8 percent—comfortably above the 2-3 percent target band—and the Middle East conflict adding fresh upside pressure through surging oil prices. The Strait of Hormuz disruptions have created imported inflation risks that likely outweigh near-term growth considerations. Resilient domestic demand, a tight labor market with unemployment near 4.0 percent, and strong commodity export revenues reinforce the hawkish tilt.
A delivered hike combined with hawkish guidance would likely extend the AUD’s rally, targeting 0.7150-0.7200 as rate differentials widen further. However, JP Morgan economists caution that markets may be over-interpreting the RBA’s hawkish stance, arguing that a pure supply shock warrants a more measured response than the post-COVID inflation episode. Key risks include geopolitical escalation dampening risk appetite or a more cautious RBA tone if second-round inflation effects appear contained. For now, the policy divergence favors AUD strength through the remainder of Q1, provided inflation data continues to justify tighter settings. Elevated volatility is likely around today’s announcement.
Technical Analysis
The EURAUD pair continues to trade within its well-established downtrend, having retreated more than 7 percent from its 2026 peak. The pair is now hovering near its recent low at the 1.6180 mark, a level that represents a critical technical inflection point. A decisive break below the 1.6180 level would signal an extension of the current downtrend, likely accelerating selling pressure toward the next support target near the psychological 1.6000 mark.
Momentum indicators align with the bearish structure. The Relative Strength Index currently registers near 36, maintaining a position below the neutral 50 level and approaching oversold territory without yet signaling exhaustion. This configuration reflects sustained selling pressure while leaving room for further downside before conditions become stretched.
Pivot point analysis places immediate resistance at 1.6334 , with stronger resistance at the pivot level of 1.6625. A breakdown below the 1.6180 support would open a path toward the 1.6050-1.5975 region, with the psychological 1.6000 level representing the next significant downside objective. For the bearish view to be invalidated, the pair would need to reclaim the 1.6300 pivot level and establish a foothold above it, a scenario that appears unlikely given the prevailing momentum configuration.
Resistance Levels: 1.6334, 1.6625
Support Levels: 1.6020, 1.5675
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