Australian Dollar Forecast: Will the 0.7120 Breakout Trigger a Run to 0.7200?

Published: March 20, 2026

Key Points

• The Reserve Bank of Australia (RBA) has raised interest rates to 4.10%, with expectations for further hikes due to inflation risks driven by oil prices and a strong labor market.
• Despite the US dollar being favored as a safe haven amid geopolitical tensions, the Australian dollar (AUD) is benefiting from its status as a net energy exporter during the ongoing Middle East oil crisis.
• The AUD/USD pair is currently trading at approximately 0.7088, facing resistance at 0.7120, which is crucial for confirming a potential upward trend.

Current Economic Context

The Australian dollar is in a critical phase, having appreciated nearly 13% over the past year. However, it faces a strong downtrend line that has limited its rallies since reaching a peak of 0.7180. The RBA's hawkish stance, following two rate hikes, has raised the cash rate to 4.10%, prompting market speculation about further increases due to inflation concerns linked to oil prices.

Factors Influencing the Australian Dollar

RBA's Hawkishness and Inflation Threats

The RBA's interest rate hikes are primarily driven by a robust job market, which saw an addition of 48,900 jobs in February, indicating economic resilience. However, the potential for energy-driven inflation due to geopolitical tensions in the Strait of Hormuz poses a significant risk, with oil prices potentially exceeding $100.

Geopolitical Tensions and Currency Dynamics

The Australian dollar is currently in a tug-of-war with the US dollar, which remains strong amid safe-haven demand due to geopolitical uncertainties. The US Dollar Index (DXY) is stable, fluctuating between 99.4 and 99.7, reflecting market confidence in the Fed's "higher-for-longer" interest rate policy.

Interestingly, rising oil prices, typically a negative for inflation, are beneficial for the AUD as Australia is a net energy exporter, allowing it to perform better than other risk currencies during turbulent times.

Technical Analysis of AUD/USD

The AUD/USD pair is currently in a compression phase, with price movements indicating a potential breakout. A close above 0.7120 on the 4-hour chart would confirm this breakout, targeting resistance levels at 0.7153 and 0.7183. The Relative Strength Index (RSI) has shown upward momentum, suggesting further room for growth before reaching overbought conditions.

However, if the price fails to maintain above the 0.7090–0.7120 zone, it could revert to support levels around 0.7017. A drop below 0.6990 would significantly alter the bullish outlook.

Conclusion

The AUD/USD pair is on the verge of a significant movement, with the 0.7120 resistance level being a critical point to watch as market dynamics evolve, particularly in response to upcoming Federal Open Market Committee (FOMC) commentary.