The AUD/USD currency pair opened the week in a consolidation phase, trading around 0.6550 on Monday morning. This price action reflects a market on pause, as FX traders anticipate a key monetary policy announcement from the Reserve Bank of Australia (RBA) on Tuesday.
The pair is hovering just below the critical resistance level of 0.6590, which marks its year-to-date high, and sits nearly 10% above the 2024 low of 0.5915, reached in April. The brokers at Aurudium provide a comprehensive breakdown of this topic in their latest article.
RBA Rate Decision in Focus
The RBA interest rate decision is undoubtedly the central catalyst for the Australian dollar (AUD) this week. The central bank’s two-day meeting concludes on Tuesday, and expectations are split among market analysts, economists, and institutional traders.
The consensus remains unclear, with some anticipating a rate hold, while others lean toward a 25-basis-point rate cut.
Reasons for a Potential Rate Hold
Supporters of a status quo decision argue that the RBA should maintain its current cash rate at 4.10%, allowing additional time to evaluate the trajectory of inflation. The argument hinges on the RBA’s desire to avoid overcorrecting monetary policy while core inflation still hovers within its target band.
The Trimmed Mean CPI, the RBA’s preferred measure of underlying inflation, rose by 2.4% year-on-year in May. This result is safely within the central bank’s 2-3% target range, reinforcing the case for patience. Additionally, concerns over wage pressures, household consumption, and global macroeconomic headwinds may support a conservative monetary stance.
Arguments for a Rate Cut
Conversely, those predicting a rate cut point to disinflationary signals and weakening domestic economic activity. Headline inflation dropped to 2.2%, its lowest reading in over three years, suggesting that price pressures are dissipating faster than initially forecast.
At the same time, recent retail sales data have been underwhelming, showing signs of demand destruction triggered by high borrowing costs. A third consecutive rate cut could reduce the RBA’s benchmark interest rate to 3.85%, offering relief to leveraged households and small businesses struggling under the weight of elevated debt servicing costs.
Adding to the bearish pressure on interest rates, Australian government bond yields have been on a downward trend throughout 2025, reflecting market sentiment that rates may continue to fall in the near term.
Technical Analysis: Bullish Setup Remains Intact
From a technical perspective, the daily chart indicates a constructive bullish pattern. Since bottoming at 0.5915 in April, the pair has been forming a clear ascending channel, linking higher highs and higher lows.
The upper boundary of this channel aligns closely with the 0.6590 resistance level, a price area that will act as the primary trigger for a bullish breakout.
Key Technical Indicators:
- The pair remains above the 50-day and 100-day Exponential Moving Averages (EMAs), a sign that the medium-term trend is still positive.
- Fibonacci analysis shows that the 50% retracement level from the 2024 low to the recent high lies near 0.6428, providing strong support.
- A confirmed break above 0.6590 would validate further upside potential, opening the door for a push toward the psychological resistance level of 0.6700.
- RSI (Relative Strength Index) remains below overbought territory, suggesting room for further upside without triggering immediate corrective action.
Bullish Scenario
If the RBA surprises the market with a dovish hold or even a rate cut accompanied by neutral guidance, and if global risk sentiment remains supportive, the AUD/USD pair could break above 0.6590.
Sustained price action above this level would likely attract momentum traders, reinforcing a rally toward 0.6700, a round-number resistance level that could attract profit-taking.
Bearish Scenario
On the other hand, failure to break above 0.6590 or a hawkish surprise from the RBA may push the pair back toward the support zone between 0.6450 and 0.6428. A breakdown below the ascending channel would invalidate the bullish thesis and could lead to a deeper retracement.
Summary and Outlook
The AUD/USD outlook remains constructively bullish, particularly if the pair can breach the 0.6590 resistance level in the coming sessions. A dovish RBA tone combined with continued U.S. dollar weakness could be the catalyst for a sustained upward move.
However, traders should remain alert to macro risks, including the potential fallout from the US President’s tariff announcement. As always, risk management and close monitoring of key levels, especially 0.6590, 0.6700, and 0.6428, will be crucial in navigating the next leg of AUD/USD’s journey.
