AUD/USD: 0.70 may hold into the RBA, but upside looks harder to chase

Macro forces pulling the Aussie in both directions

• Headline inflation is falling, but still high: Annual CPI eased to 3.8%, while underlying inflation remained elevated at 3.6%. The softer print reduces the urgency for another immediate hike, but inflation is still above the RBA’s comfort zone.
• Consumer confidence remains subdued: Higher mortgage costs and cost-of-living pressures continue to constrain households.
• The housing market is cooling: Falling prices and weaker turnover should eventually weigh on consumption through a negative wealth effect.
• Household spending remains resilient: Spending rose more strongly than expected in June, suggesting the impact of three rate hikes has not yet fully reached consumer demand.

RBA next week: Hold, but keep the fourth hike alive?

The RBA decision is due on Tuesday, 11 August at 12:30pm SGT, alongside its updated Statement on Monetary Policy. Governor Michele Bullock’s press conference follows at 1:30pm SGT.

No change at 4.35% is the base case. Softer inflation, a weaker labour market and the housing slowdown give the RBA room to assess the impact of the three hikes already delivered this year.

But traders should not assume the hiking cycle has been formally closed. Resilient household spending and still-elevated underlying inflation could prompt the RBA to state clearly that a fourth hike remains possible if demand or inflation proves more persistent.

That distinction matters for AUD/USD: a hold is largely expected, but an explicit warning that further tightening may be required could still provide a hawkish surprise.

Positioning scenarios

1. Base case: RBA holds with a hawkish bias

The RBA is likely to stress that inflation remains above target and that rate cuts are not imminent. That could keep AUD/USD supported around 0.6970–0.7000, but without a hike, rallies towards 0.7050–0.7100 may struggle to extend.

Positioning: Buy dips rather than chase above 0.70.

2. Bullish surprise: RBA keeps a fourth hike firmly on the table

If the RBA focuses on resilient spending and explicitly signals that it remains prepared to tighten again, AUD/USD could break above 0.7050 and test 0.7100, particularly if US data weakens.

Positioning: Look to buy a confirmed break above 0.7050, targeting 0.7100 and potentially higher.

3. Bearish risk: RBA acknowledges that rates have peaked

A softer growth forecast or greater confidence that inflation is returning to target could bring forward rate-cut expectations. A break below 0.6970 would weaken the setup and expose 0.6900–0.6920.

Positioning: Sell a sustained break below 0.6970, targeting the 0.6900–0.6920 area. A recovery above 0.7020–0.7050 would invalidate the bearish setup.

Trading bias: Mildly bullish while AUD/USD holds above 0.6970, but the risk-reward increasingly favours buying pullbacks rather than chasing the move. The biggest downside risk is that the RBA begins preparing markets for eventual cuts while US data keeps the dollar supported.