AUDUSD poised for minor correction before resuming uptrend

The AUDUSD pair enjoyed a powerful run last week, decisively climbing from 0.667 to 0.690. In fact, this rally extended into yesterday, as traders set their sights on breaking the 2024 highs just above 0.694. However, the target proved to be elusive on the first attempt, leading to long-side profit-taking by the end of the session. This paves the way for a potential tactical pullback, which could provide a better opportunity to join the Australian dollar's ascent.

For investors looking for a correction, two levels stand out: the first is 0.6894, the midpoint of a recent price gap between January 23 and 26. A deeper retracement could find buyers near 0.6875, which corresponds to the 23.6% Fibonacci of the last major hike. Momentum indicators suggest a brief cooling-off period is likely: the Relative Strength Index (RSI) is retreating from overbought territory, while the Stochastic Oscillator is showing signs of a new bearish thrust during today's trading. Once this energy that builds up goes away, the focus will shift back to conquering 0.694. 

Fundamentally, the outlook for the pair is gaining significant support. Analysts polled by Bloomberg forecast AUDUSD to reach 0.70 by the end of March, a target propelled by surging Australian bond yields, which have hit their highest since autumn 2023. This repricing is being driven by a series of positive economic releases, featuring falling unemployment and strengthening business confidence. In the meantime, inflation is reemerging as a key concern. Tomorrow's data will likely reveal that the Consumer Price Index (CPI) accelerated to 3.3% in the fourth quarter (Q4) of 2025.

A new report is about to provide the final figures needed to prompt the Reserve Bank of Australia (RBA) to hike interest rates at its February 3 meeting. Markets see a 60% chance of this happening, yet a high inflation reading may tip the scales. Adding to this cocktail is the concurrent Federal Reserve (Fed) meeting on Wednesday. Although the regulator is expected to maintain the status quo, any change in tone from Chairman Jerome Powell could easily spark a new wave of volatility across currency markets.

The following plan may come into play for your trading:

Buy AUDUSD in the range of 0.6875–0.6894. Lock in profits at 0.694. Place Stop loss at 0.6835.