AUD/USD extended losses after a small fall the previous day, trading near 0.7140 in Asian hours on Friday. On the daily chart, it remains inside an emerging descending wedge, with the next move depending on price behaviour at the pattern’s edges.
The pair is holding just above the 50-day EMA at 0.7115 and below the nine-day EMA at 0.7164. The 14-day RSI is near 48, pointing to consolidation after the recent pullback.
Key Technical Levels And Wedge Outlook
If AUD/USD retests and breaks above the nine-day EMA at 0.7164, the next level is the wedge’s upper boundary near 0.7200. A clear move above that area could open a path towards 0.7277, the highest since June 2022, set on May 6.
On the downside, support sits at the 50-day EMA of 0.7115, then the wedge’s lower boundary around 0.7080. A drop below 0.7080 could add downward pressure towards 0.6833, a four-month low recorded on March 30.
The analysis used an AI tool.
We can see how the market has shifted since the analysis from this time last year in 2025, when AUD/USD was consolidating near 0.7140. Today, the pair is trading significantly lower around 0.6650, reflecting a fundamental change in market dynamics. The descending wedge pattern we were watching last year ultimately resolved to the downside, breaking below the 0.7080 support in late 2025.
Policy Divergence And Trading Implications
The primary driver has been the growing policy divergence between central banks. We have seen the US Federal Reserve signal it will hold rates firm in response to April’s resilient non-farm payrolls report, which showed 195,000 jobs added. Meanwhile, Australia’s Q1 2026 inflation data came in at 2.9%, just within the RBA’s target band, increasing market bets on a rate cut before the end of the year.
For derivative traders, this environment suggests that buying AUD/USD call options is a high-risk, low-probability strategy. Instead, positioning for further weakness through buying put options or establishing bear put spreads could be more prudent. This allows traders to capitalize on potential declines while defining their maximum risk.
Implied volatility for AUD/USD options has recently ticked up, currently sitting near a three-month high. This indicates the market is pricing in larger price swings in the coming weeks. While this makes buying options more expensive, it also confirms that the period of consolidation seen last year is firmly behind us.
The technical levels we monitored in 2025, like the 0.7115 support, are now distant long-term resistance. In the near term, we are watching key support at the 0.6600 psychological level. Any rallies toward the 0.6720 area could be viewed as selling opportunities, given the strong underlying bearish pressure.
Looking ahead, upcoming US inflation data and Australia’s next quarterly GDP figures will be critical. A higher-than-expected US CPI print would likely strengthen the dollar and push AUD/USD lower. Traders should manage their positions carefully around these key data releases.
