RBA Stays Hawkish. Is AUD/USD Ready for Another Move Higher?

The Australian Dollar is finding fresh support as a hawkish Reserve Bank of Australia keeps the door open to further rate hikes.

AUD/USD climbed for a second straight session, trading around 0.7090 during Asian hours on Monday.

The move comes as traders continue to digest the RBA’s latest policy signals. Governor Michele Bullock has made it clear that policymakers are prepared to act if inflation does not cool as expected.

That message is keeping the possibility of another rate hike alive — and giving the Aussie a lift.

Societe Generale described the RBA’s latest statement as hawkish, while Rabobank still expects the central bank to deliver one more hike later this year.

The U.S. side of the equation is also helping AUD/USD.

U.S. Retail Sales fell 0.6% month-on-month in July, missing expectations for a 0.1% increase. The weaker reading has taken some heat out of expectations for further Fed tightening and put pressure on the US Dollar.

That leaves the policy gap between Australia and the U.S. back in focus.

If the RBA stays firm while the Fed becomes less hawkish, the Aussie could have more room to move higher.

For AUD/USD, 0.7100 is now the level to watch. A break above it could bring 0.7190 into view, while 0.7058 remains an important support area.

the Aussie has a supportive mix of its own: a hawkish RBA, softer U.S. data and a dollar that has lost some momentum.

With AUD/USD hovering just below 0.7100, traders will be watching closely to see how the pair handles the level.