Facts

• AUDUSD has been holding above the 10-day exponential moving average (EMA10; yellow) for seven consecutive sessions.
• Michele Bullock, Governor of the RBA: “We may need further interest rate hikes.”
• The probability of an interest rate hike in Australia by the end of 2026 increased from approx. 50% to approx. 67% over the past week.

Recommendation

• Position: Long (BUY) on AUDUSD at market price
• Target Price (Take Profit; TP): 0.71400 (TP1), 0.71850 (TP2)
• Stop Loss (SL): 0.70000

Source: xStation5

Opinion

The AUDUSD exchange rate has been moving in an uptrend since early July, reinforced by the dovish tone of the July FOMC meeting. Currently, the swap market prices in roughly a 50% chance of a September rate hike, marking a sharp decline from expectations prior to the Fed’s latest decision (when probability sat near 100%). Monetary support for the dollar weakened further following an unexpected decline in US payrolls according to the latest NFP report. Furthermore, consensus estimates for the upcoming inflation report project CPI falling to 3.4% YoY—its lowest level since April 2026. Despite a recent correction, US Treasury yields remain higher than before Kevin Warsh took over as Fed Chair, meaning that even a higher-than-expected CPI reading is unlikely to back the Fed into a corner regarding rate hikes, thereby limiting the potential for a pro-dollar surprise. Conversely, market pricing for Australian rate hikes shifted higher following today’s RBA decision. While the Australian central bank kept interest rates on hold at 4.35% and presented more dovish economic forecasts, Governor Michele Bullock’s comments keep markets on high alert. In addition to acknowledging the potential need for further hikes, Bullock signaled that the RBA requires more time to feel confident that inflation is cooling down—especially given the recent record employment surge of 76,000 jobs. Recent shifts in central bank communications, alongside dynamics in bond and interest rate markets, support a continuation of the AUDUSD uptrend. A potential dip in global risk appetite stemming from escalation in the Middle East remains a key risk factor, though volatility on the pair is becoming increasingly desensitized to geopolitical swings.

Shift in Australian monetary policy expectations (red: current pricing, blue: one week ago, gray: 4 weeks ago). Source: XTB Research, Bloomberg WIPR OIS data.

Methodology

This recommendation was prepared based on a technical analysis of the AUDUSD chart and a fundamental analysis of the respective economies (monetary policy in Australia and the US). The directional bias was determined using moving averages and market expectations regarding central bank policies. Take Profit and Stop Loss levels were established using Fibonacci retracements and price action:

• TP1 is set at the late May / early June resistance level.
• TP2 is set at the 78.6% Fibonacci level.
• SL is placed at the July support level, which coincides with the 100-day dark violet EMA.