Australian Dollar Forecast: AUD/USD Bulls Target 0.7186 After RBA Hikes to 4.10%

Author: Arslan Ali

Published: March 17, 2026

Key Highlights

• The Reserve Bank of Australia (RBA) raised the cash rate to 4.10%, citing increased inflation risks due to Middle East conflicts and rising petrol prices.
• Australia's GDP growth stands at 2.6%, with a 5-4 split in the RBA's decision indicating a divergence in monetary policy compared to the US.
• The AUD/USD pair is currently recovering, trading between 0.7060 and 0.7087, supported by the RBA's hawkish stance.

RBA's Decision and Economic Context

The RBA's recent decision to increase the cash rate by 25 basis points marks its second consecutive hike this year. The decision was made in a narrow 5-4 vote, reflecting a hawkish tone from the RBA. The bank expressed concerns about persistent inflation risks, particularly due to rising fuel prices and domestic capacity pressures.

Governor Michele Bullock noted that while global inflation has decreased from its peak in 2022, it has surged again in the latter half of 2025, driven by geopolitical tensions in the Middle East that have pushed petrol prices in Australia above $2.20 per liter.

Market Dynamics and AUD Performance

The Australian economy is experiencing growth that exceeds forecasts, leading to a divergence between the RBA and the US Federal Reserve. Market expectations now suggest a potential terminal rate of 4.35% for the RBA, contrasting with the Fed's challenges in managing cooling labor data.

Additionally, strong economic indicators from China, Australia's largest trading partner, are supporting the Australian dollar. Retail sales in China rose by 2.8% year-on-year in February, and industrial production increased by 6.3%, bolstering demand for Australian commodities like iron ore and LNG.

Technical Analysis of AUD/USD

The AUD/USD pair has formed a higher-low base near the 0.7000 support level, aligning with a major ascending trendline. The pair recently reclaimed the 0.5 Fibonacci level at approximately 0.7073, indicating a potential end to the recent correction.

Key support is identified at the 0.7058 level (200-period MA), which is crucial for maintaining bullish momentum. If the pair can sustain a close above the 0.618 retracement at 0.7108, it may target a retest of the yearly high at 0.7186.

Trading Strategy

Traders are advised to look for long entries above the 0.7108 level, targeting a trend extension towards 0.7186, with a protective stop-loss set below the 0.7058 support zone.

Conclusion

The RBA's hawkish stance amidst rising inflation risks and strong economic indicators from China are providing support for the Australian dollar. The AUD/USD pair's technical setup suggests potential for further gains if key resistance levels are breached.