Aussie Slips Despite RBA Hike as Growth Warning Weighs

AUD/USD steadied on Tuesday after a risk-off slide that took the pair more than 1% lower from midweek levels last week and back below 0.7000 heading into the Reserve Bank of Australia’s policy decision. The pair has found a modest bid since the European open, and the U.S. Dollar’s behavior offers some context for the Australian Dollar’s prospects. Despite a safe haven tone across markets this week, USD has not rallied with much magnitude, leaving room for any improvement in risk sentiment to flow meaningfully back into the Aussie.

The RBA raised its target rate by 25-bps to 4.85% overnight, the highest level since late 2008, in a 6-3 decision with three members voting to hold. The hike, the fifth this year, was in line with expectations. Policymakers pointed to persistent inflation pressure from the commodity price shock tied to the U.S.-Iran war and AI-related demand, but the updated forecasts warned of slower growth and a higher unemployment path. The bank also dropped language signaling further hikes if needed, a shift that pairs with the split vote to suggest the tightening cycle may be nearing its end. With other major central banks moving to the sidelines, traders are weighing relative rates against relative growth, and a hike paired with a softer outlook has not translated into currency strength. With the near-term event calendar for the pair relatively light, risk sentiment is likely to remain the primary driver.

AUD/USD Daily Price History

In the above chart, AUD/USD is trading within a messy zone of support and resistance established in October between 0.6975 and 0.7000. A quick reclaim of 0.7000 would restore short-term footing and reopen the broader range toward the September high at 0.7200. Timing matters here: even stabilizing chop at or below this zone would drain momentum from the pair, making it more likely that the late October rally comes to be defined as a failed breakout. In that scenario, a retest of 0.6900 would appear to be the path of least resistance.

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