Australian Dollar Forecast: AUD/USD Reverses Gains Ahead of RBA “Hawkish Hold”

AUD/USD Key Points

• The RBA is expected to leave rates unchanged at 3.6% at Tuesday’s meeting, but the tone of the policy statement and Governor Michele Bullock’s press conference could prove market-moving.
• Rate markets now assign a 50% probability of tightening by June and fully price a move by August, totaling roughly 35 bps of hikes next year.
• With AUD/USD at a critical technical level, the post-meeting technical outlook should be clear heading into the holidays.

To avoid burying the lede, the Reserve Bank of Australia (RBA) is widely expected to leave its cash rate unchanged at 3.6% at Tuesday’s meeting, but the tone of the policy statement and Governor Michele Bullock’s press conference could prove market-moving. With no updated forecasts released this month, traders and economists will focus on whether the Bank acknowledges the recent upside surprises in inflation and shifts toward a more hawkish stance.

Headline CPI accelerated to 3.8% in October, moving further above the RBA’s 2–3% target band and fueling market expectations that the next policy move in 2026 will be a hike, not a cut. Rate markets now assign a 50% probability of tightening by June and fully price a move by August, totaling roughly 35 bps of hikes next year. This marks a dramatic reversal from early December, when investors still expected the next move to be a cut.

Source: Bloomberg

The statement will be scrutinized for stronger language around inflation risks. RBA official Hauser recently suggested that two-thirds of Q3 inflation was “noise,” but if the Board signals reduced confidence that price pressures are temporary, or hints that policy is no longer restrictive, markets could interpret this as an overt hawkish shift.

Governor Bullock’s remarks may be even more influential. Her recent warning that “if inflationary pressures were more permanent, it would have implications for the future path of monetary policy” underscores the Bank’s readiness to hike if needed. Still, Bullock has also argued that part of the recent inflation rise is temporary, and that quarterly prints should ease into 2026.

At this point, markets are pricing in a “hawkish hold” with the central bank acknowledging the upside risks to inflation and hinting that the next move will be an increase. Against that backdrop, even a neutral statement and press conference could lead to downside for the Australian dollar, which is at a key technical level as we go to press.

 

Australian Dollar Technical Analysis: AUD/USD Daily Chart

Source: StoneX, TradingView

From a technical perspective, AUD/USD appeared to be breaking out from its prolonged sideways range between 0.6375 and 0.6625 this morning, though the pair is now pulling back to retest that key previous-resistance-turned-support level.

While this is not the ideal setup for a pre-meeting trade, it should lead to a clearer outlook once the RBA meeting is behind us. If Governor Bullock acknowledges that the central bank is leaning toward hiking rates in the first half of the year, AUD/USD should catch a bid and eventually move toward the 14-month high at 0.6700, especially if the Fed is relatively dovish in its meeting on Wednesday.

Meanwhile, a more neutral hold from the RBA could weigh on the Aussie, taking the pair back into its familiar range and opening the door for a reversion back toward the 0.6500 area heading into the holidays.

-- Written by Matt Weller, Global Head of Research

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