AUD Flirts with Overbought Territory as RBA Maintains Hawkish Stance
The Australian dollar (AUD) has been maintaining a neutral-to-bullish stance above its 200-day Simple Moving Average (SMA), but it's flirting with overbought territory, which could lead to a technical correction. Despite this, the AUD's relatively solid domestic fundamentals and the Reserve Bank of Australia's (RBA) cautious stance have discouraged aggressive selling.
A convincing move beyond 0.7100, ideally supported by firm Australian data, stronger expectations of another RBA rate increase, lower US yields or a widespread improvement in risk appetite could trigger a breakout. In this scenario, the target would be around 0.7200, followed by the 2026 ceiling at 0.7277.
However, if inflation proves more persistent than expected, the RBA may still hike rates, which could further support the AUD's upside potential. The bank has maintained a hawkish position, warning that monetary policy remains relatively restrictive after three rate rises this year.