AUD/USD, EUR/AUD Outlook: RBA Hikes Again as Inflation Pressures Build
By Matt Simpson, Market Analyst
Date: 17/03/2026
Summary
The Reserve Bank of Australia (RBA) has increased its cash rate by 25 basis points to 4.1% due to rising inflation risks. This decision comes amidst increasing inflation expectations and geopolitical tensions affecting energy prices, particularly due to the ongoing conflict in Iran. The RBA's board was divided on the decision, indicating the complexity of the current economic landscape.
Market Implications
For foreign exchange traders, the focus is now on the potential for another rate hike in May and how this compares to the Federal Reserve's stance, which may not lean towards a dovish pivot. This situation leaves the AUD/USD pair vulnerable near its cycle highs, while the EUR/AUD is trending lower towards significant support levels.
RBA's Decision Analysis
The RBA's decision to hike rates was not unanimous, with only five out of nine members supporting the move. The bank cited capacity pressures and rising short-term inflation expectations as key factors influencing their decision. The ongoing geopolitical tensions, particularly in the Middle East, are expected to keep inflation elevated, complicating the economic outlook. If the conflict continues to drive oil prices higher, it could negatively impact economic growth, potentially leading to a reconsideration of future rate hikes.
Technical Analysis
AUD/USD
The AUD/USD has entered a choppy trading phase around the 0.70 level, with recent bearish candlestick patterns indicating potential resistance. The upcoming Federal Reserve meeting is a critical risk event that could influence the pair's direction. The expectation is that the Fed may not adopt a dovish tone, which could further support the US dollar and create headwinds for the Australian dollar.
EUR/AUD
The EUR/AUD continues to show a strong bearish trend, with the price approaching the key support level of 1.60. Despite the bearish momentum, there are signs that the move may be nearing exhaustion, as indicated by oversold conditions in the RSI. Traders may look to adjust their positions as the price approaches this critical support level.
Conclusion
The RBA's recent rate hike reflects the challenges posed by rising inflation and geopolitical tensions. As the market anticipates further moves from the RBA and the Federal Reserve, traders should remain vigilant of the evolving economic landscape and adjust their strategies accordingly.