|

AUD/USD: Consolidation risk after RBA pause – Societe Generale

Societe Generale strategists note AUD/USD has pulled back after the Reserve Bank of Australia (RBA) delivered a third 25bp hike to 4.35% while signalling a pause. The pair is drifting below 0.7150 despite earlier reclaiming its 50‑DMA, with risk sentiment and the RBA’s data‑dependent stance expected to guide direction around key 0.7060 and 0.7225 levels.

Key supports and RBA-driven outlook

"Three hikes and done, receive the front end in Australia? Not so fast. The third rate increase today by the RBA puts the CRT at 4.35% but this is below the new higher projection of 4.7% for Dec-26 (raised from 4.2% in February). In other words, the central bank is holding powder in reserve to tighten at least once more. The rate then stays at 4.7% through 2027 and 1H-28. Core inflation peaks at 3.8% in 2Q and then drifts down to 3.1% by the end of this year, to 2.6% in 2027 and 2.5% in 1H-28. Headline CPI falls back from 4.0% in Dec-26 to 2.4% by mid-2027. "

"Governor Bullock sounded more neutral this time in her comments, prompting the receiving interest in the front end and bull steepening in 2s/10s. The further crystallisation of upside risks to inflation and inflation expectations will determine if rates are hoisted again to 4.6%, probably in August or September. A pause in June looks a done deal. The statement highlighted the risk of second-round effects across goods and services. Governor Bullock reiterated that the Board has no predetermined path and will remain data-dependent, ruling nothing in or out."

"AUD/USD reclaimed its 50‑DMA in April and subsequently staged a strong rebound. However, the pair has struggled to establish itself beyond the March peak, carving out an interim high near 0.7225; this points to a lack of steady upward momentum."

"A period of consolidation cannot be ruled out. Defence of the 50‑DMA around 0.7060 is crucial for continuation of the up move. A break above 0.7225 may lead to a larger uptrend."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

AUD/USD eases from one-month high; holds above 0.7000 amid softer USD

AUD/USD pulls back slightly after hitting a fresh one-month high in the Asian session on Monday as bulls turn cautious ahead of the latest Australian consumer inflation figures and the crucial FOMC decision later this week. Meanwhile, expectations of another RBA rate hike in November support the Aussie. Moreover, a softer US Dollar helps the currency pair hold above the 0.7000 psychological mark.

USD/JPY extends recovery from one-month low beyond 157.00

USD/JPY kicks off the week on a positive note, building on Friday's modest bounce from the 156.00 neighborhood, or a one-month low amid some repositioning ahead of key central bank events and data risks. The Fed and the BoJ will announce their policy decisions on Wednesday and Friday, respectively. This, along with the release of Advance US Q3 GDP and the PCE Price Index on Thursday, should provide some meaningful impetus to the currency pair.

Gold struggles below $4,000 as oil-driven inflation fears reaffirm Fed hike bets

Gold attracts follow-through selling at the start of the new week, trading below $4,000 during the Asian session and near a three-month low. Higher energy prices continue to fuel inflation fears and reinforce US rate-hike expectations, undermining the non-yielding bullion. Bears, however, might refrain from placing aggressive bets ahead of the crucial FOMC meeting and other key central bank events this week.

Week ahead: Central bank and earnings bonanza could roil markets

After joining the rate-hike club in September, the Federal Reserve looks set to stand pat in October, waiting to assess more data before deciding to hike again. Whilst this isn’t an unusual move for a central bank, it somewhat contradicts Fed Chair Kevin Warsh’s new mantra of data dependency and zero forward guidance.

CFTC Report: WTI rally runs ahead of positioning
The week in one sentence: WTI prices surged while speculative longs were cut in the week to October 20, creating the clearest price/positioning divergence. Sterling and the Canadian Dollar led the constructive currency shift, while Yen longs also rebuilt. Speculators turned less constructive on the WTI, reducing their net exposure to around 89.3K contracts.
What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.