Australian Dollar Outlook: Rates Lead AUD/USD, Options Signal Risk
Author: Matt Simpson, Market Analyst
Date: 08/02/2026
Summary
The Australian dollar (AUD) has shown strong performance against major currencies, primarily driven by a hawkish rate hike from the Reserve Bank of Australia (RBA). The RBA raised rates by 25 basis points, bringing the cash rate to 3.85%, which has supported the AUD/USD pair, allowing it to close above 70 cents for the first time in two years.
Despite the positive technical outlook, options markets are indicating rising downside risks as significant US economic data approaches, suggesting that the recent rally may be sensitive to upcoming events.
Recent Performance of the Australian Dollar
Last week, the Australian dollar outperformed all major currencies, with the AUD/USD rising for the third consecutive week. The AUD/CAD and AUD/JPY also showed strong gains, with the latter reaching a 35-year high. However, the GBP/AUD and EUR/AUD pairs fell, reflecting a weaker pound and euro against the Australian dollar.
RBA's Future Rate Hikes
The RBA's recent hawkish stance has led to expectations of further rate hikes, with forecasts suggesting a potential increase to 4.2% by December. This outlook is contingent on stable employment and inflation metrics.
Key Economic Data to Watch
This week, traders will focus on US economic data, particularly the nonfarm payrolls (NFP) report, retail sales, and consumer price index (CPI) figures. These data points are crucial as they could influence the strength of the US dollar and, consequently, the AUD/USD exchange rate.
Correlation Analysis
The AUD/USD has shown a weakening correlation with the US dollar index, while its relationship with the Chinese yuan has strengthened. This shift may indicate a re-alignment of market dynamics affecting the Australian dollar.
Futures Positioning
Large speculators have increased their net-long positions in AUD/USD, reaching a 13-month high. This indicates a bullish sentiment, although the overall positioning remains cautious.
Technical Analysis
On the technical front, the AUD/USD is showing signs of a potential bull flag pattern, but there are early warning signs of waning momentum. The market may need to consolidate or correct before resuming its upward trend.
Outlook Scenarios
Two scenarios are outlined for the AUD/USD:
- Bullish Scenario: A daily close above 0.7050–0.7100 could confirm a continuation of the bullish trend.
- Bearish Scenario: A close below 0.6900 would invalidate the bullish structure, indicating a potential reversal.
Conclusion
The Australian dollar's recent strength is underpinned by RBA's hawkish policies, but traders should remain cautious due to potential risks from upcoming US economic data. The interplay between domestic and international factors will be crucial in determining the future trajectory of the AUD/USD pair.