AUD/USD Price Forecast: Struggles to extend rally above 0.7100

The Australian Dollar (AUD) trades 0.17% lower at around 0.7050 against the US Dollar (USD) during the early European trading session on Thursday. The Aussie pair extends Wednesday’s correction, which started after revisiting the two-month high near 0.7090, as financial markets remain unconvinced by the Reserve Bank of Australia’s (RBA) hawkish tone.

On Tuesday, the RBA left its Official Cash Rate (OCR) unchanged at 4.35%, as expected, and explicitly said that the central bank won’t hesitate to raise interest rates further, citing upside inflation risks.

Contrary to the RBA’s hawkish remarks, financial markets believe that the RBA’s appetite to tighten monetary conditions appears very weak.

Analysts at Standard Chartered note that, at the press conference, Governor Bullock “talked up the uncertainty around the RBA’s central forecasts and did not rule out the need for more policy tightening in the immediate future if upside inflation risks materialise.”

Despite this hawkish nuance, Standard Chartered emphasises that “our base case remains no more RBA rate hikes in the foreseeable future.” The bank cautions, however, that “the risk to our view is skewed towards a hike in Q4 if demand does not slow sufficiently or if energy prices revisit recent highs, exacerbating both capacity and price pressures.”

Ultimately, “easing labour-market conditions, if sustained, should help contain underlying wage and price pressures in the economy,” supporting their view that further tightening is not the central scenario even as the RBA keeps its options open," Standard Chartered added.

Meanwhile, an upbeat US Dollar, despite traders paring back hawkish Federal Reserve (Fed) bets for the September meeting, is also hurting the Aussie pair.

AUD/USD Technical Analysis

AUD/USD trades lower at around 0.7050, but is holding a constructive bullish bias as it remains within an upward parallel channel. The pair is trading above the 20-day exponential moving average (EMA) at 0.7024, which suggests underlying demand, while the channel top near 0.7077 caps the immediate topside.

The Relative Strength Index (RSI) at 56.69 stays in positive territory, hinting that bullish momentum is intact though not overstretched.

On the downside, initial support is located at the 20-day EMA at 0.7024, ahead of the lower boundary of the rising channel around 0.6951, with a deeper structural floor toward 0.6866. On the topside, a sustained break above the channel resistance at 0.7077 would open the way for further gains within the broader ascending structure. Above 0.7077, major hurdles are the round-level resistance at 0.7100, followed by the June 5 high at 0.7144.

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