AUD/USD Bears Denied a Big, Bearish Breakout via Hawkish RBA, Weak USD
Author: Matt Simpson
Date: Wed, 21 Oct 2026
Overview
The AUD/USD currency pair has shown resilience against a potential bearish breakout, primarily due to a combination of hawkish commentary from the Reserve Bank of Australia (RBA) and a weakening US dollar. This has allowed the Australian dollar to rally, defying expectations of a head-and-shoulders breakdown pattern.
Inflation Concerns and RBA's Stance
Recent comments from RBA Deputy Governor Andrew Hauser have intensified inflation concerns, indicating that the inflation outlook is worse than previously anticipated. This has led to a significant increase in market expectations for a rate hike in November, with odds rising from 25% to 50%. Major banks, including Goldman Sachs, have adjusted their forecasts to reflect a likely 25 basis point hike in November.
Current Economic Indicators
Despite unemployment holding steady at 4.7% and a decline in employment numbers, the RBA is prepared to accept some economic weakness to combat inflation. The Australian dollar has performed well against other currencies, with notable gains against the US dollar, Japanese yen, and euro, although it has faced challenges against the New Zealand dollar.
Technical Analysis of AUD/USD
Initially, there were concerns about a bearish breakout for AUD/USD, but the pair has experienced four consecutive bullish days. The recent price action suggests that the head-and-shoulders pattern may not materialize as previously thought. Key resistance levels are identified near 0.7050 and 0.7075, where traders should exercise caution.
Yield Spread and Market Sentiment
The current yield spread between Australian and US two-year bonds has not confirmed the rally in AUD/USD, indicating that bulls should be cautious. The market sentiment remains mixed, with potential for further movement depending on upcoming US economic data.
AUD/NZD Technical Analysis
In the AUD/NZD pair, the New Zealand dollar has shown stronger performance, leading to a decline in AUD/NZD. The weekly chart indicates a potential pullback after an overextended bullish trend, with bearish signals emerging from recent price action.
Conclusion
The outlook for AUD/USD remains cautiously optimistic, driven by hawkish RBA expectations and a weaker US dollar. However, traders should remain vigilant of resistance levels and market sentiment as economic data is released in the coming weeks.