Australian Dollar Outlook: AUD/USD Mulls Pullback Despite RBA Hike Bets

View related analysis:

Australian Dollar Performance

It has been a very strong start to the year for the Australian dollar overall. However, with several AUD crosses at or near resistance — or already retracing — it suggests any hawkish surprise from this week’s RBA meeting may already be priced in.

Source: LSEG

AUD/USD snapped a nine-day winning streak on Friday, its strongest daily run in nine years
AUD/CAD printed a weekly shooting star at the 2023 high, warning of potential trend exhaustion
AUD/JPY formed an inside week and spinning-top doji, signalling hesitancy to break above the 2024 high near the 110 handle
AUD/NZD retraced for a third consecutive week, though price action still looks corrective rather than a trend reversal
EUR/AUD suffered its worst monthly decline in 3.5 years as the Aussie rose against the euro for a sixth straight week
GBP/AUD fell to a 13-month low and closed decisively below 2.00

Australia This Week: Economic Data and Events for AUD/USD Traders

Date	AEDT (GMT +11)	Event
Mon 2 Feb	09:00	AU PMIs
	11:30	AU ANZ Job Advertisements (Jan)
	12:45	CN Caixin Manufacturing PMI (Jan)
Tue 3 Feb	01:45	US S&P Global Manufacturing PMI (Jan)
	02:00	US ISM Manufacturing Prices (Jan)
	04:30	FOMC Member Bostic Speaks
	11:30	AU Building Consents (MoM) (Dec)
	14:30	RBA Cash Rate Decision (No Change Expected), Monetary Policy Statement
Wed 4 Feb	00:00	FOMC Member Barkin Speaks
	01:40	FOMC Member Bowman Speaks
	02:00	JOLTS Job Openings
	16:10	RBA Assistant Governor Jones Speaks
Thu 5 Feb	00:15	US ADP Nonfarm Employment Change (Jan)
	02:00	US ISM Non-Manufacturing PMI (Jan)
Fri 6 Feb	00:30	Jobless Claims
	02:50	FOMC Member Bostic Speaks
	09:30	RBA Gov Bullock Speaks
Sat 7 Feb	00:30	US Nonfarm Payrolls (Jan)
	02:00	US Michigan Consumer Sentiment, Inflation Expectations (Feb)

RBA Policy Outlook: Big Four Banks Brace for a Rate Hike

Over the past couple of weeks, Australia’s jobs report has beaten expectations while quarterly inflation landed broadly in line with consensus — the issue being that those estimates were already pitched at a higher inflation outcome. As a result, trimmed mean CPI rose to 3.3% y/y, remaining above the Reserve Bank of Australia’s 2–3% target band. That contrasts with the RBA’s November forecast, which pencilled in a moderation to 2.7% y/y by Q4.

Still, market reaction suggests positioning had leaned toward an even hotter inflation print, with the three-year yield falling 11bp following the release. Even so, economist forecasts and market pricing currently favour a 25bp hike on Tuesday, which would lift the cash rate to 3.85%.

RBA cash rate futures implied a 67% probability of a 25bp hike on Friday, and all Big Four banks have now updated their forecasts to expect tightening. While ANZ view a single 25bp move this week as “insurance” rather than the start of a sustained hiking cycle, NAB also expects a second 25bp hike in May, which would take the cash rate to 4.10%.

I may be left with egg on my face by Tuesday’s close, but my base case is that the RBA holds rates at 3.6% while delivering a clearly hawkish undertone. Even if the RBA does hike this week, it is difficult to see sufficient appetite for another move in May unless inflation re-accelerates in the late-April CPI report.

Take note that the RBA will also release its Monetary Policy Statement, including updated economic and inflation forecasts.

ISM, NFP and FOMC Speakers on Standby

The key risk from this week’s ISM and NFP reports is that they fail to soften enough to revive rate-cut discussions. That leaves markets exposed to upside surprises — and the potential for less-dovish commentary from FOMC members.

That risk is amplified by Friday’s rebound in the US dollar following confirmation that President Trump has nominated Kevin Warsh to replace Jerome Powell as Fed Chair. The dollar sell-off has now lost an important dovish narrative. Markets had assumed Trump would opt for a more rate-cut-friendly replacement, but Warsh has previously argued that the Fed was too loose during Covid.

If US data shows renewed resilience, Warsh could ultimately prove more inclined to keep rates higher for longer than Powell. That leaves the US dollar vulnerable to a broader rebound — a dynamic that could weigh on AUD/USD over the near term.

AUD/USD Futures Positioning | COT Report

Large speculators flipped to net-long exposure for the first time since December 2024. While net longs of 7.1k contracts are not a sentiment extreme, gross long exposure sits just below a nine-year high, warning of near-term crowding risk.

With signs already emerging that the Australian dollar rally is pausing for breath, AUD/USD could be vulnerable to further losses if this week’s RBA hike is viewed as a one-and-done — or if the RBA holds altogether. That said, potential inflection points in precious metals and the US dollar may prove to be the bigger drivers of any near-term retracement, before AUD/USD’s broader bullish trend resumes.

Chart prepared by Matt Simpson - Source: ABS, LSEG

AUD/USD Correlations

Chart prepared by Matt Simpson - Source: LSEG

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

The sharp sell-off in gold and silver, alongside a late-week rebound in the US dollar index, has weighed on the Australian dollar. A shooting star formed on the AUD/USD weekly chart, while an evening star reversal appeared on the daily, with price closing back below 70c. With risk reversals pointing lower — as demand for puts rises relative to calls — a pullback now looks overdue.

The weekly VPOC just above the 68c handle stands out as a potential support zone for a modest near-term retracement. I doubt AUD/USD pushes down to 67c, but even if it did, the broader bullish trend would remain intact.

Ultimately, bulls are likely to view dips as opportunities, with scope for the Australian dollar to challenge 72c in the weeks ahead.

Source: LSEG

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.