Aussie dollar steadies near highs as traders brace for RBA hold, hawkish risk
The Australian dollar hovered just below recent peaks ahead of the Reserve Bank of Australia’s policy decision, with markets primed for an unchanged cash rate at 3.6% and a vigilant tone on inflation that could tilt hawkish at the margins.
RBA preview: steady hand, sharper inflation watch
Governor Michele Bullock has signaled inflation has surprised on the upside and the economy is operating near potential, even if the exact output gap is unclear. The labor market remains tight, and while the latest bounce in trimmed-mean inflation could prove temporary, the RBA is watching price data “very closely.” No new projections are due at this meeting, so traders will parse the statement and press conference for clues on whether elevated inflation persistence might force a tougher stance.
A policy hold at 10:30 PM ET is the consensus call, but risks are skewed toward a firmer commitment to contain inflation if price pressures don’t ease as expected. That mix could lift front-end Aussie yields and keep AUD supported, especially against low-yielders.
AUD/USD: momentum constructive into the decision
AUD/USD has climbed steadily since its November 21 low at 0.64206, reaching a high near 0.66488 late last week and testing that zone again today. The upswing accelerated after CPI re-accelerated to 3.8% y/y from 3.6%, reinforcing expectations that the RBA cannot declare victory on inflation.
A pivotal shift occurred on November 25 when the pair vaulted key trend markers, flipping momentum in favor of buyers:
– Reclaimed the 100-hour moving average (now near 0.6610) and the 200-day moving average
– Advanced through the 200-hour MA (around 0.6532)
– Broke above the 100-day MA and Fibonacci markers—the 50% and 61.8% retracements of the decline from the September 17 high (around 0.6563 and 0.6597)
Today’s pullback low near 0.6615 held above the rising 100-hour MA, underscoring that zone as pivotal short-term support ahead of the RBA.
Immediate levels to watch
- Support: 0.6610 (100-hour MA); 0.6597 (61.8% retracement); 0.6573 (200-hour MA); 0.65635 (50% midpoint of the September decline)
- Resistance: 0.66488 (recent swing high); 0.66588 (September 18 swing high); 0.66888/0.6706 (September 17 highs)
Market context and trading implications
– Into the event, FX volatility typically firms as positioning tightens and options hedging picks up. AUD often trades as a pro-risk proxy tied to global growth and commodities; a hawkish RBA tilt could extend gains, particularly versus the yen and euro.
– A decisive break and hold below 0.6610 would be the first sign of momentum fatigue, inviting a deeper pullback toward 0.6597 and the 0.6570s. Conversely, a close above 0.6649 opens a path to 0.6659 and the 0.6689–0.6706 resistance band.
– Equity risk appetite and U.S. yields remain secondary drivers. A weaker U.S. dollar backdrop would amplify any RBA-induced AUD strength; a firmer dollar could cap rallies even on a hawkish-leaning hold.
Key Points
- RBA expected to keep the cash rate at 3.6% at 10:30 PM ET; no fresh projections this meeting.
- Governor Bullock warns inflation has surprised higher; tight labor market and near-capacity growth raise risk of a hawkish tilt.
- AUD/USD up from 0.64206 to near 0.6649 since Nov. 21; bullish bias while above the 100-hour MA (0.6610).
- Break below 0.6610 would dent momentum; above 0.6649 targets 0.6659 then 0.6689–0.6706.
- Traders focus on statement language around inflation persistence and the labor market for clues on the policy path.
FAQ
When is the RBA decision and what is expected?
The decision is due at 10:30 PM ET. Markets widely expect the cash rate to remain at 3.6%, with a watchful tone on inflation.
Why does the statement matter more than usual this time?
This meeting does not include updated economic projections, so the statement and press conference will guide expectations on how the RBA sees inflation risks and capacity constraints.
What could move AUD/USD the most?
A hawkish tilt—stronger language on inflation persistence or limited tolerance for upside surprises—would likely support AUD. A softer tone would risk a pullback, especially if the pair falls and holds below 0.6610.
What are the key technical levels for AUD/USD?
Support sits at 0.6610, 0.6597, 0.6573, and 0.65635. Resistance is at 0.66488, then 0.66588, followed by 0.66888–0.6706.
How does inflation affect the RBA’s next moves?
If inflation proves stickier than expected, the RBA may signal a readiness to tighten further or keep policy restrictive for longer. That would generally be supportive for AUD and short-dated Australian yields.
What else should traders watch around the decision?
Headline risk from the press conference, shifts in global risk sentiment, and the U.S. dollar tone. Liquidity can thin around the release, amplifying moves. For real-time updates and analysis, follow BPayNews coverage through the decision window.
