AUD/USD Outlook: RBA Hike Priced In as Yields Ease, Momentum Fades
AUD/USD is holding above key support near 0.71 following the RBA’s latest rate hike, although momentum has softened as Australian bond yields edged lower. While the central bank lifted its cash rate outlook, the move largely aligned with market expectations, limiting the upside response in the Australian dollar. With yield support easing but not reversing, the broader bullish structure remains intact, although a period of consolidation or pullback may unfold in the near term.
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RBA Hike Priced In as Softer Yields Temper AUD/USD Momentum
The RBA hiked the cash rate by 25bp to 4.35%, marking its third consecutive increase. Odds were always in favour of the move, and I’d argue the 74% probability implied by RBA cash rate futures understated the likelihood—given hawkish commentary, sticky inflation, and elevated oil prices linked to Middle East tensions.
The Statement of Monetary Policy (SOMP) saw the cash rate forecast revised higher from 4.2% to 4.7% by December. While that may appear significant, it largely aligns with market pricing ahead of the meeting, helping explain the muted market reaction. RBA cash rate futures were already implying a rate of 4.75% by December, suggesting the central bank is effectively catching up with money markets.
While their revised forecast only suggests a further 35bp of tightening from current levels by December, they left plenty of wriggle room for a more aggressive path throughout the statement.
Source: RBA, LSEG
Highlights from the RBA Cash Rate Statement
- Inflation picked up materially in the second half of 2025
- Early signs that many firms are looking to increase prices of their goods and services
- Short-term measures of inflation expectations have also risen
- Inflation is likely to remain above target for some time and that the risks remain tilted to the upside, including to inflation expectations
- With the conflict in the Middle East continuing, there are plausible scenarios where inflation is higher and activity lower than envisaged under the baseline forecast
- Eight members voted to hike, one voted to hold
Australian Bond Yields Ease, Trimming AUD Momentum
The fact that Australian bond yields are slightly lower across the curve on the day suggests the RBA’s revised cash rate outlook was not as hawkish as some had feared. While the central bank lifted its terminal rate projection, the move largely aligned with prior market pricing, prompting a modest pullback in yields rather than a fresh repricing higher.
This has seen the AU–US 2-year yield spread edge lower, driven by softer domestic yields, which in turn has taken some momentum out of the Australian dollar. However, the spread remains positive overall, meaning the Aussie still retains a relative yield advantage against the US dollar.
With AUD already posting a strong multi-week rally, this mild cooling in yield support could be enough to trigger a near-term consolidation or pullback across some FX crosses. That said, unless the AU–US yield differential compresses more aggressively, any downside may prove corrective rather than the start of a broader reversal.
Source: ASX24, LSEG, TradingView
Australian Dollar Technical Analysis
AUD/USD Outlook: Bullish Above 0.71, But Momentum Softens
I have outlined in prior articles that my bias for AUD/USD remains bullish while prices hold above last week’s low near 0.71. Momentum has softened following the RBA meeting, although volatility remains contained. As such, I see no change to the broader outlook, with AUD/USD targeting 0.73 initially and potentially extending towards 0.75 if it continues to hold above 0.71.
However, should the US dollar continue to strengthen, a deeper pullback towards 0.70 could be on the cards. Even then, I would still favour a higher Australian dollar over the coming months.
AUD/JPY Outlook: Bearish Reversal Signals Further Pullback
The tight consolidation around 114 had a false breakout to the upside before suspected MOF intervention sent the Japanese yen broadly higher. This saw momentum turn sharply lower on AUD/JPY, highlighting the potential for at least one more leg down.
A small bearish outside day formed on Monday, while the BOJ continues to jawbone the yen. Given the extended move higher in the Australian dollar, a move towards 109 or a retest of the 1991 and 2024 highs could be on the cards.
AUD/NZD Outlook: Rising Wedge Signals Reversal Risk
This is another Australian dollar cross that has benefited from a strong uptrend since April 2025. However, price action on the daily AUD/NZD chart points to a potential rising wedge pattern, placing the cross on alert for a bearish reversal.
If confirmed, the pattern projects a move towards the cycle lows near 1.4937.
GBP/AUD Outlook: Bounce Risk Builds Within Downtrend
Momentum is attempting to turn higher on the GBP/AUD daily chart. While it may seem “brave” to push against the established downtrend, the formation of a higher low relative to March provides some encouragement for a near-term bounce.
With signs of potential weakness in the Australian dollar emerging elsewhere, GBP/AUD may be able to extend higher in the short term before sellers look to reassert control.
Source: ICE TradingView
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-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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