AUD Trading Outlook: 0.7150 in Focus Ahead of RBA Meeting

The Australian dollar has cemented its place as the standout performer in the G10 FX complex in 2026. The strongest year to date gains have been recorded against the euro, yen and pound, and the currency is now threatening to break out above recent consolidation highs. 

A daily close above 0.7150 in AUDUSD would signal price persistence and reinforce the bullish trend that began in November. Market participants clearly see several attractions in holding long positions in the Australian dollar, with both macro and technical factors supporting the move.

RBA rate expectations driving currency demand 

One of the key tailwinds for the Australian dollar is the upcoming Reserve Bank of Australia meeting. Markets currently price around a 58% probability that the central bank will raise rates by 25 basis points at Tuesday’s meeting. This represents a sharp increase from roughly a 20% probability at the beginning of the week.

Expectations shifted after the RBA’s communication suggested the meeting should be considered live, with a rate hike firmly on the table. The shift in sentiment was reinforced when Deputy Governor Andrew Hauser noted in an unscheduled podcast that rising energy prices were not a helpful development for monetary policy. 

Previously, markets had expected the RBA to wait until May before tightening policy. That view was based on the upcoming flow of inflation data, including the February monthly CPI figures released on 25 March, the first quarter CPI figures due on 29 April, and additional employment reports before the May meeting. 

However, the recent rise in inflation expectations in Australian bond markets has introduced a new sense of urgency and raised the question of why the RBA would wait. 

Interest rate markets signal further tightening ahead 

Swaps pricing offers further insight into market expectations. For the May meeting, markets imply around a 22% probability that the cash rate could be 50 basis points higher by that point. 

This pricing could reflect two scenarios. One is that the RBA holds in March and delivers a larger move in May. The more likely interpretation is that the market expects a hike in March followed by a smaller probability of another move in May. Further along the curve, markets are pricing around 60 basis points of cumulative tightening by December, which would take the cash rate to approximately 4.45%. 

If realised, this would leave Australia with a higher policy rate than most G10 economies. Aside from the Reserve Bank of New Zealand, the RBA would be seen as pursuing one of the more aggressive tightening paths among developed market central banks. 

Why traders continue to favour the Australian dollar 

Several structural and market driven factors continue to support the bullish narrative for the Australian dollar. 

• The market clearly likes the AUD. The Australian dollar is trending higher across multiple cross rates, with bullish breakouts seen against the yen, euro, pound, Swiss franc, Norwegian krone and New Zealand dollar. Pullbacks have been shallow and well supported even in a higher volatility environment. Momentum and trend, and aligning with market flows, are often strong signals for currency traders.

Relative interest rate differentials are working in favour of the Australian dollar. For corporate treasury teams and macro hedge funds, investors are effectively paid to hold AUD positions through positive carry, even if the absolute level of carry remains modest.

 • The RBA tightening cycle is gaining momentum. Forward interest rate swaps suggest that, among G10 central banks, only the Reserve Bank of New Zealand is expected to hike more aggressively over the coming 12 months. 

• Australia has experienced a strong positive term of trade shock since early January. Compared with many other economies, Australia’s terms of trade remain comparatively strong. This is particularly evident against currencies such as the yen, where long AUDJPY positions remain a core macro trade. 

• Growth and economic activity in Australia remain relatively robust. The economy is expanding at a pace that supports the currency without forcing the RBA into an overly aggressive tightening cycle. For global FX funds, owning currencies linked to steady growth environments holds clear attractions. 

• Political risk in Australia is perceived as relatively low. From an international investor perspective, policy settings in Australia are seen as predictable and stable compared with several other G10 economies. Currency investors tend to favour environments with certainty and limited political disruption. 

• The Australian dollar is a pro cyclical risk currency. Yet, despite elevated volatility in energy markets and the VIX trading around 25, global equity markets have remained resilient. The S&P 500 has held above its 200-day moving average, Chinese equities have stabilized and trade in a consolidation range, and dip buyers remain active. 

• Fiscal risks in Australia are comparatively modest. Government debt levels remain manageable relative to several other G10 economies. At the same time, fiscal spending from the government may reinforce the view that the RBA will maintain a tightening bias to contain inflation pressures. 

Taken together, strong momentum, favourable macro dynamics and rising rate expectations continue to position the Australian dollar as one of the most compelling currencies in the G10 complex in 2026.