The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.1%, as widely expected, but the decision underscored a growing divide within the board, passing by a narrow 5–4 vote. The hike reflects increasing concern that inflation pressures are re-emerging, with policymakers pointing to stronger demand and capacity constraints that have driven a pickup in price momentum during the second half of 2025. The RBA now sees inflation remaining above its 2–3% target range for longer, with risks clearly tilted to the upside.
External factors are adding to those concerns. Rising fuel prices tied to Middle East tensions are already lifting short-term inflation expectations, raising the risk that price pressures become more entrenched. While financial conditions have tightened, the RBA acknowledged uncertainty around how restrictive current policy actually is, reinforcing a cautious, data-dependent approach going forward. Overall, the decision highlights the central bank’s commitment to anchoring inflation expectations, even as internal disagreement suggests less clarity on the path ahead.
From a market perspective, the reaction has been two-sided but is now tilting higher. AUDUSD initially chopped around key technical levels near its 100- and 200-hour moving averages (0.7065–0.7076), before finding support buyers at the 100 hour MA (at 0.7076) and pushing toward new session highs near 0.7100. The bounce has been helped by a turn higher in US equities, supporting broader risk sentiment.
Technically, the 100-hour moving average near 0.7076 is the key short-term barometer. Holding above keeps buyers in control, with upside targets at 0.7107 followed by a swing area between 0.7122 and 0.7135. A break above that zone opens the door toward last week’s high at 0.7187. Conversely, a move back below 0.7076—and especially below the 200-hour moving average near 0.7065—would shift control back to sellers and weaken the bullish bias.
In the video, I break down the key technical levels and explain what traders should be watching next as the market digests both the policy decision and evolving risk sentiment.
