February 25 was a significant day for the Australian dollar as annual inflation held at 3.8%, raising the possibility that the Reserve Bank of Australia (RBA) will keep rates on hold for a longer period of time or possibly raise them further. Recent announcements of new US tariffs have not had a significant impact on the Australian dollar. This article summarizes the latest Australian economic data, then briefly looks at the AUDUSD and AUDJPY charts.
Annual headline inflation in Australia has remained significantly above target since last summer, prompting the RBA to move against the general direction of travel among central banks and raise the cash rate to 3.85% in early February. The RBA indicated a data-dependent approach to rates in 2026, but it may suggest further hikes if inflation remains so high:
Australia’s inflation rate (%). Source: tradeeconomics.com / Australian Bureau of Statistics
After peaking in July 2025, annual headline inflation in Australia has continued to rise since then to the current 3.8%. Both January and December results were unexpectedly high, but last month’s number was only 0.1% above consensus. The primary factor driving higher inflation in January was the withdrawal of states’ electricity exemptions. At the same time, the labor market does not seem to be significantly reduced:
Australia’s unemployment rate (%). Source: tradeeconomics.com / Australian Bureau of Statistics
Conversely, the last two jobs reports from Australia were overall positive, with unemployment at 4.1% in January also 0.1% below consensus. There are currently no signs that the rise in unemployment since last summer is likely to continue immediately. However, the unemployment rate without seasonal adjustments rose to 5.9%, suggesting that the tight labor market indicated by the RBA may not necessarily continue.
Australia’s overall economic growth as measured by GDP remains subdued overall but not as stagnant as in some other major developed economies. GDP growth of 0.4% in the third quarter of 2025 was significantly higher than the low of 0.1% in the last quarter of 2023.
The RBA and traders are also looking ahead to Australian GDP data for the final quarter on March 4. It is expected to be significantly stronger at around 0.8%. If so, it may suggest more hawkish signs from the RBA in its statement on March 17, but it is questionable whether this will be a new round of tightening or just one more hike is likely this year.
Current expectations from money markets suggest an around 80% chance of the RBA hiking in May to 4.1%. The RBA’s current forecasts suggest a rise in annual headline inflation to around 4.2% this summer, so it is important to monitor any updates to this.
AUD/USD daily candle chart. Source: exness.com
The Australian dollar headed for a fourth consecutive monthly gain against the US dollar in late February as traders expect another rate hike from the RBA in 2026 and the likely start of a rate hike. Although the Australian dollar is generally sensitive to potential barriers to trade, recent announcements on tariffs by the US Supreme Court and the government have not clearly affected the AUDUSD.
71c remains the main technical reference and around 71.5ca possible resistance. With the price nearing a three-year high, it’s hard to pinpoint any further potential resistance, but 72c is a contender as bull no. The 161.8% weekly Fibonacci extension around 74.5c is well above the top of the daily chart and is unlikely to be tested for now, but overall a continuation of the upside extension looks possible with the slow stochastic not signaling overbought and volume remaining positive overall.
The 20 SMA is a strong dynamic support in the short term. Below here, the price may find further support from the bands around the 50 SMA and the 100% Fibo retracement near 69c. A deeper pursuit than that would probably require a major shift in sentiment. Traders will focus on Australian GDP for the final quarter on Wednesday, March 4, and of course, the NFP on Friday, March 6.
AUD/JPY daily candle chart. Source: exness.com
The Australian dollar hit its highest domestic rate since February 25, 2026 against the yen on Oct. 25 when Australia announced higher-than-expected annual headline inflation in January. Uncertainty over the likely direction of monetary policy has dominated financial news from Japan recently, as the Bank of Japan’s board appears to be split between easing and continuing modest tightening.
In this case the main challenge for new AUDJPY buyers is to find good entries that are not close to recent long-term highs. Another retracement to the 100% weekly Fibonacci area may provide such an opportunity depending on momentum and volume. ¥112 could be the next resistance if the price reaches new highs.
The 20 SMA has not been clear dynamic support recently, but it could challenge a break below around ¥109.50. Overall, the rate of upside in mid-2025 is very stable, as indicated by the relatively low ATR, slightly below one yen. As for the AUDUSD, a key upcoming release that may drive the future direction is Australia’s GDP on March 4; 0.8% as expected, or maybe even higher, could boost AUDJPY.
This article was submitted by Michael Stark, analyst at Exness.
For the latest analysis, business ideas and more, follow Michael on X: @MStarkExness.
The opinions expressed in this article are personal to the author; They do not represent Exness. This is not a recommendation for business.
This article was originally published on FX Empire
