The RBA is set to hike again in the upcoming Asian session—but that’s not the real story. Markets have largely priced in a 25 basis point move to 4.35%, and the focus has already shifted to what comes next. For the Australian Dollar, the outcome hinges not on the hike itself, but on whether the RBA signals that the tightening cycle is far from over.
Inflation is forcing the central bank’s hand. Headline CPI jumped from 3.6% to 4.6% in Q1. Trimmed mean measure eased slightly to 3.3% but remained elevated. Crucially, this strength is emerging even before the full impact of higher oil prices feeds through the economy, raising the risk that inflation could stay elevated for longer than previously expected, reinforcing the case for further tightening at this meeting
However, the path beyond May is unclear. According to a Reuters poll, while 18 of 31 economists expect the cash rate to remain at 4.35% through year-end, more than a third now see rates rising to at least 4.60% by the end of the third quarter, marking a notable shift in expectations compared to a month ago. This divergence underscores the importance of the RBA’s updated projections.
The Statement on Monetary Policy will be the real battleground. The key question is when inflation is expected to return to the 2–3% target. If that timeline is pushed back toward late 2026 or even 2027, it effectively signals that current policy is not restrictive enough—a clear green light for further tightening. Any hint from Governor Michelle Bullock that “more may be required” would reinforce that message.
This sets up a critical moment for AUD/USD, which is now pressing against the 0.72 resistance zone. This level, aligned with 61.8% retracement of 0.8006 to 0.5913 at 0.7206, has repeatedly capped rallies, turning it into a defining technical barrier.
Further rise is expected for now, with 0.7101 acting as near-term support. A clean break above 0.7206 would mark a decisive shift, opening the path toward the 0.80 handle in the medium term. But without a hawkish push from the RBA, the risk is that this rally stalls once again.
If the central bank leans cautious or avoids strong forward guidance, the market may interpret it as hesitation, triggering rejection at resistance. A break below 0.7101 would indicate rejection at resistance and could open the way for a deeper pullback toward 0.6832.
In this context, the RBA’s communication will be pivotal. A clearly hawkish signal, particularly via inflation projections or forward guidance, could provide the catalyst needed for AUD/USD to break through 0.72. Conversely, a more cautious or data-dependent tone may reinforce existing uncertainty and keep the pair within its current range.
