Australian Dollar surged broadly after minutes from the December policy meeting confirmed that the RBA had actively discussed the possibility of a rate hike in 2026. While officials stressed that such an outcome is far from assured, the acknowledgment alone was enough to reprice expectations and trigger a sharp AUD bid.
According to the minutes, board members debated whether a rise in the cash rate might need to be considered sometime next year following a recent pickup in inflation. Policymakers agreed that risks to inflation had tilted to the upside, but emphasized that it would take “a little longer” to judge whether price pressures would prove persistent rather than temporary.
The discussion also revealed internal disagreement over whether financial conditions remain sufficiently restrictive. Some members pointed to aggressive bank lending and ongoing strength in housing prices as signs that conditions may no longer be tight enough to restrain inflation effectively, adding weight to the upside risk narrative.
At the same time, the board agreed that labor market conditions remain somewhat tight, with the economy likely still operating in excess demand. Elevated capacity utilization was also flagged as evidence of ongoing supply constraints, reinforcing concern that inflation could prove more stubborn than previously assumed.
Markets reacted by pushing AUD higher across the board, with AUD/USD extending its rebound from 0.6420. Immediate focus has now shifted to a critical cluster resistance zone around 0.6706–0.6713, which includes 38.2% retracement of 0.8006 to 0.5913 at 0.6713.
Decisive break above this 0.6716/13 zone would mark a significant technical development. It would strengthen the case that AUD/USD is already reversing the entire downtrend from the 2021 high at 0.8006.
In that scenario, the next near-term target comes in at 61.8% projection of 0.5913 to 0.6706 from 0.6420 at 0.6910.
Beyond the near term, confirmation of a broader trend reversal would open scope for a move toward to 61.8% retracement of 0.8006 to 0.5913 at 0.7206 and above next year.
