Australian Dollar Forecast: AUD/USD Bulls Eye 0.7100 Breakout as RBA-Fed Divergence Counteracts “War Premium”

The AUD/USD is showing some remarkable resilience right now, hanging out around 0.7060-0.7080 on March 10 2026, as the Aussie starts to bounce back from its recent geopolitical stress test. Despite the persistent ‘war premium’ being driven by the US-Israel-Iran conflict, the Australian Dollar has managed to recover from the 0.6957 lows it hit on March 9, thanks in part to the widening interest rate differential which is finally starting to favour the AUD for the first time since 2017.

With RBA Governor Bullock basically saying that the March 17 meeting is still “on the cards” for a potential rate hike to 4.10%, the pair is now pushing up against some pretty key resistance levels that are going to have a big say in how the rest of Q1 goes.

The Impact On The Market Of Geopolitical Stress And A USD Safe-Haven Pivot

The one thing still holding back the AUD/USD is the escalating Middle East conflict, which has pushed Brent and WTI crude oil prices above the $100 mark, sending US Dollar safe-haven demand surging.

This “risk-off” environment normally puts a lot of pressure on commodity-sensitive currencies like the AUD, but the impact has been somewhat mitigated by Australia’s role as a major energy exporter.

While the US Dollar Index (DXY) did reach 15-week highs near 99.70 not so long ago, it’s since slipped back down to the 99.00 range suggesting that the initial “panic bid” may be starting to stabilise as markets wait for Wednesday’s US CPI data.

The Policy Split Between the RBA And Fed: A Structural Support For The AUD

A key pillar of support for the AUD is the significant policy divergence between the Reserve Bank of Australia and the Federal Reserve. Following Australia’s strong Q4 2025 GDP growth of 2.6%, the fastest in nearly three years, the RBA is still pretty clear that it wants to tighten policy to get on top of the inflation which is currently running at 3.8%.

In contrast, the Federal Reserve is facing a slowing US labour market – highlighted by a pretty big loss of 92,000 jobs in February – which has only reinforced expectations that it’s going to cut rates at least twice in 2026. This “RBA-Fed Split” is attracting some carry-trade inflows, with long-term targets for the pair now potentially stretching out to 0.7300 to 0.7500 by year-end.

The AUD/USD 4H Technical Outlook: Taking Back The 0.7100 Pivot

On the 4-hour chart, AUD/USD has just about wiped out its short-term bearish structure by breaking above a descending trendline that had been capping price action since late February.

Breaking The Descending Trendline: The recent move above the trendline shifts the market structure from “lower highs” to a potential base formation, with buyers re-taking control around 0.7085.

50 & 200 EMA Support: Bullish candles have cut through the 50-EMA ($0.7060), and the 200-EMA ($0.7000) is now in line with rising support from the February lows, providing a robust structural floor.

Momentum and RSI: The RSI is climbing towards 60, showing improving bullish strength without quite hitting overbought extremes yet. A sustained breakout above the 0.7100 horizontal resistance would open the way to 0.7146 and the multi-year high zone.

Key Market Drivers and Trade Strategy

The Australian Dollar’s trajectory through the March 17 RBA meeting is going to be defined by the following catalysts:

Wednesday US CPI: A lower-than-expected inflation print would likely weaken the DXY even further, giving the green light for an AUD surge towards 0.7200.

RBA “Live” Meeting (March 17): Markets are currently pricing in a 20-22% chance of a 25bps hike; any confirmation of this move would likely catalyse a breakout above current resistance levels.

Commodity Ties: Stabilisation in iron ore prices and China’s recovery hints continue to provide an underlying fundamental floor for the AUD.

Trade Idea: Look for long entries on a sustained 4-hour close above 0.7100 targeting 0.7145 and 0.7200, with a stop-loss placed below the 0.7050 support zone.