AUD/USD Price Forecast: Bulls have the upper hand amid widening RBA-Fed divergence

The AUD/USD pair builds on the previous day's bounce from the vicinity of the 0.6900 mark and gains strong positive traction on Tuesday in reaction to the Reserve Bank of Australia's (RBA) hawkish interest rate hike. As was widely expected, the central bank decided to raise the Official Cash Rate (OCR) for the first time in more than two years, by 25 basis points (bps) to 3.85%, to restrain sticky inflation. In fact, the Australian Bureau of Statistics reported last week that consumer inflation climbed above the RBA’s 2% to 3% annual target in December. Moreover, the central bank expects inflation to be much higher in 2026.

In the post-meeting press conference, RBA Governor Michele Bullock said that it will now take longer for inflation to return to the target and that this is no longer an acceptable outcome. The central bank also revised up its forecast for the economy to expand by 2.1% by June this year, from 1.9% previously, while the labour market was still judged to be tight. This, in turn, backs the case for further policy tightening and provides a strong boost to the Australian Dollar (USD). Apart from this, the upbeat market mood is seen undermining the safe-haven US Dollar (USD) and further benefiting the risk-sensitive Aussie.

US President Donald Trump announced on Monday that the US and India have reached a trade deal and will immediately move to lower tariffs on each other’s goods. Moreover, Iran and the US are expected to resume nuclear talks on Friday, marking a de-escalation of geopolitical tensions and further boosting investors' confidence. Adding to this, bets that the US Federal Reserve (Fed) will cut interest rates two more times this year fail to assist the USD to capitalize on its recent recovery from a four-year low. This lends additional support to the AUD/USD pair and backs the case for a further appreciating move.

AUD/USD daily chart

Technical Analysis:

Against the backdrop of the pair's resilience near a technically significant 200-day Simple Moving Average (SMA) and a breakout through the 0.6700 mark, acceptance above the 0.7000 psychological mark validates the positive outlook. The Moving Average Convergence Divergence (MACD) line holds above the Signal line and in positive territory, though the histogram has begun to contract from recent highs. The Relative Strength Index (RSI) prints at 73 (overbought), which could cap near-term gains.

The trend structure remains firm as the long-term SMA slopes upward, with price extension above it reinforcing buyers’ control. MACD’s positive stance supports the bullish tone, but the contracting histogram hints at moderating upside impulse; a renewed expansion would revive momentum. RSI remains above 70 (overbought), and a pullback could relieve pressure without undermining the prevailing uptrend. Secondary support is located at 0.6565, derived from the rising 200-day SMA trajectory.

Overall, the setup favors dips being bought while momentum cools, with the uptrend persisting as long as the pair holds above its rising 200-day average.

(The technical analysis of this story was written with the help of an AI tool.)