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29.01.202600:49 Forex Analysis & Reviews: AUD/USD: The Rise of the Australian Dollar and the Price Barrier of 0.7000

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The AUD/USD pair has reached nearly a three-year high and is currently trying to consolidate above the key resistance level of 0.7000. This important price barrier poses a significant challenge for AUD/USD buyers. However, the prevailing fundamental backdrop supports the pair's growth, not only due to the weakening of the greenback but also to the strengthening of the Australian dollar.

Exchange Rates 29.01.2026 analysis

On Wednesday, the Aussie reacted positively to the release of Australian inflation data. The report was indeed quite strong—almost all components were in the "green zone," reflecting an acceleration of the main indicators. The data was released on Wednesday for December and, notably, for the fourth quarter of 2025. The overall Consumer Price Index (CPI) rose by 1.0% on a quarterly basis, while most analysts had forecast a decline to 0.7%. Year-on-year, the overall CPI accelerated to 3.8% QoQ (the highest since spring 2024), with a forecast growth rate of 3.6%. This metric has shown upward dynamics for the second consecutive quarter.

The key core inflation indicator (trimmed mean CPI), which better reflects long-term inflation trends, rose to 3.4% (with a forecast of 3.2%). The structure of the quarterly report indicates that price growth is primarily structural rather than seasonal, despite the fourth quarter including the Christmas and New Year period. The main contributions came from housing and rental costs, where demand remains strong against limited supply. Additionally, there was a sharp increase in electricity prices related to the conclusion of government subsidy programs.

Another important point is that inflationary pressures are manifesting across several significant components of the consumer basket, rather than being concentrated in one or two volatile categories, as evidenced by the dynamics of core inflation, which remains above the RBA's target range. Seasonal factors (specifically, the increase in travel and leisure prices during the holiday period) are indeed present but play a secondary role. More importantly, prices for essential goods and services (such as food, medical, and educational services) are rising, reflecting strong domestic economic activity.

In other words, inflation growth is fueled by stable fundamental factors rather than temporary spikes. The inflation data should be viewed alongside last week's Australian employment report. Recall that the unemployment rate fell to 4.1% in December (the lowest level since May last year), and the total number of people employed in December increased by 65,000 (the highest number since April last year)—against a forecast of a gain of 28,000. The confident growth of the overall employment figure was driven by increases in full-time employment, while part-time employment showed weak dynamics (a ratio of 54.8/10.4 thousand).

Such results allow the Reserve Bank of Australia (RBA) not only to maintain a wait-and-see position but also to offer "hawkish" rhetoric. Thus, the RBA still has two options on the table: maintaining the status quo or increasing interest rates.

Amid heightened hawkish sentiment, the Australian dollar has strengthened across the market, including against the greenback, which is under significant pressure. Several fundamental factors are pushing down the US currency: Trump's statements regarding the exchange rate of the national currency (he "welcomed" the dollar's depreciation), the threat of a shutdown, tensions in relations between the US and Canada, and Trump's aggressive remarks towards Tehran (stating that a "big armada" of the US led by the aircraft carrier Abraham Lincoln is ready to use force against Iran).

The established fundamental backdrop does not favor a downward reversal for EUR/USD. The situation could change if the Fed takes a hawkish stance and rules out a rate cut at the next meeting. However, in my opinion, traders have overly high expectations about the Fed's potential "hawkishness." Therefore, long positions in the EUR/USD pair appear more logical and attractive at this time.

From a technical standpoint, the pair is either at the upper line or between the middle and upper lines of the Bollinger Bands indicator on all higher timeframes (from H4 and above) and above all lines of the Ichimoku indicator. Euro buyers are trying to consolidate above the 1.1860 resistance level (the upper line of the Bollinger Bands on the W1 timeframe). The next target for the upward movement is 1.1930 (the upper line of the Bollinger Bands on the H1 timeframe). Breaking through this target will open the way for euro buyers toward the area of the 20-figure.

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