Australian Dollar: Is the RBA Capping Gains Against the US Dollar? - Societe Generale

AUD/USD is trading below 0.70 as a dovish RBA rate hike and weaker industrial metals weigh on the pair, according to Societe Generale’s Kenneth Broux and colleagues. Industrial metals continue to exert a greater influence than RBA/Fed spreads, while the 200-day moving average around 0.7050/0.7080 is viewed as a crucial resistance zone. With positioning heavily skewed towards shorts, waning expectations of further RBA tightening and lower iron ore prices have also eroded fundamental support.

How are a dovish RBA and weaker iron ore weighing on AUD/USD?

"Elsewhere in G10, the RBA earlier today delivered a fifth rate hike of the cycle, hoisting the CRT to 4.85%. The cumulative tightening of 125bp since February leaves the policy rate above the peak of 2011 and at levels last seen before the GFC."

"The accompanying statement was relatively dovish and omitted the reference to “increasing the cash rate target further if needed” while highlighting risks of inflation being above 3% for the coming year and high inflation expectations becoming embedded."

"The dovish tweak, the split vote (6-3) and CRT projection of 4.9% peak in June 2027, suggest this may well be the final hike of the cycle. Governor Bullock reiterated that policy is already restrictive by a range of metrics, including mortgage-servicing burdens, signs of softness in the housing market and estimates showing rates now sit around the upper end of neutral-rate models."

"Markets increasingly view the RBA as being in the final stages of its tightening cycle, while SGX iron ore has retreated to around $90/MT from May's peak near $108/MT, removing an important source of support for the currency."

"AUD/USD remains essentially a play on industrial metals rather than RBA/Fed differentials. The 200dma near 0.7050/0.7080 remains the key hurdle. The level provided support for much of 2026 but flipped to resistance, and a decisive break is required for sentiment to turn bullish."

"Positioning remains heavily skewed against the currency, with short AUD exposure rising to 39.5% of OI, the most bearish reading since February 2025. Fundamentally, some of the AUD's earlier tailwinds have also faded."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)