AUD – AUD Narrow consolidation, waiting for a breakout

Since the start of the week, the AUD/USD pair has been trading in a tight range. On Tuesday, the Reserve Bank of Australia (RBA) held interest rates steady, which did not trigger any major market reaction.

As widely expected, the RBA kept the cash rate at 4.35%, receiving unanimous approval, and also released its latest quarterly forecasts. The RBA expects inflation will not return to the midpoint of the target range until the end of 2027, and noted that this forecast faces upside risks. It also projected the unemployment rate would rise gradually from 4.5% at year-end to 4.8% by the end of 2028.

The tone of the press conference was more hawkish than the accompanying statement. The committee discussed rate hikes but did not consider rate cuts. Policy was described as “restrictive and tightening”, and the governor reiterated that if necessary, further increases to the cash rate may be made. The three rate hikes seen so far this year were cited as reasons to remain patient—not reasons to stop. Rising oil prices were specifically mentioned, with the view that more companies are planning to pass costs on to consumers. The RBA's next meeting is scheduled for September 29, while the Fed will make its rate decision on September 16.

AUD/USD remains capped by the 100-day moving average. After breaking below this level in June, the pair previously failed to reclaim it. As a result, the 100-day moving average around 0.7050 is now especially important: a breakout above it could set the stage for further upside. The projected extension targets are 0.7120 and the 0.72 area, with the May 6 high at 0.7277 serving as another reference point.

Conversely, if the pair continues to be rejected at the 100-day moving average, near-term consolidation may occur. Support is expected around the 50-day moving average at 0.6990 and 0.6940. Wider support is seen at 0.6860 and the 250-day moving average at 0.6840.

Forecast range
Resistance: 0.7050* – 0.7120 – 0.7200
Support: 0.6990 – 0.6940 – 0.6860 – 0.6840 – 0.6700**

This week's highlights (11/8)
Australia NAB July Business Conditions: 4
Australia NAB July Business Confidence: -6

RBA decision
RBA holds interest rate steady at 4.35%

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