Australian Dollar Forecast: AUD/USD Eyes 0.7186 Breakout

Published: March 18, 2026

Key Highlights

• The Reserve Bank of Australia (RBA) raised interest rates to 4.10% in a narrow 5-4 vote, citing concerns over oil-driven inflation due to the ongoing Middle East conflict.
• The Federal Reserve is expected to maintain steady rates, focusing on price stability amidst rising crude inventories and the US-Iran war.
• AUD/USD bulls are targeting a breakout at 0.7142, with potential gains towards multi-year highs at 0.7186.

Market Context

The AUD/USD pair is trading around 0.7114, following the RBA's recent interest rate hike. The geopolitical tensions, particularly Iran's blockade of the Strait of Hormuz, have pushed oil prices to approximately $100-$103 per barrel, influencing market dynamics.

RBA's Interest Rate Decision

The RBA's decision to hike rates by 25 basis points reflects its efforts to combat inflation, which is currently at 3.8% and could rise to 5% if petrol prices continue to increase. The vote was closely contested, indicating internal divisions regarding the timing of future rate hikes.

FOMC Meeting Insights

As the Federal Open Market Committee (FOMC) convenes, expectations lean towards a "hawkish hold" on rates, with a 99% probability that they will remain between 3.75% and 4%. The FOMC is navigating a complex economic landscape marked by rising inflation and a sluggish labor market.

Technical Analysis of AUD/USD

On the technical front, the AUD/USD is consolidating between 0.7110 and 0.7142. A breakout above 0.7142 could signal a shift in trend, while failure to do so may lead to a decline towards support levels at 0.7083 and 0.7028. Current indicators suggest a bullish trend, with the price above key moving averages and the RSI indicating upward momentum.

Conclusion

The Australian dollar is poised for potential gains as it navigates through a challenging economic environment influenced by both domestic monetary policy and international geopolitical tensions. Traders are advised to monitor key resistance levels and the outcomes of the FOMC meeting for further direction.