The Australian Dollar rose for a second day after the Reserve Bank of Australia increased rates by 25 basis points to 4.10% on a 5-4 vote. AUD/USD was at 0.7104, up 0.48%. US equities rose by 0.10% to 0.47% as risk appetite improved before the Federal Reserve decision. The US Dollar Index fell 0.29% on the day and nearly 1% on the week, and stood at 99.57.

Rba Decision And Market Reaction

RBA Governor Michelle Bullock said the vote reflected timing rather than direction, and mentioned discussion about holding until May. This was linked to waiting for more data and uncertainty around the Middle East conflict. US data showed the ADP Employment Change 4-week average fell from 14.75K to 9K. February Pending Home Sales rose 1.8% month-on-month after a 1% fall in January. The Fed meeting runs from 17 March and ends Wednesday with a statement and updated projections. Markets expect no March change, with one 25 basis-point cut priced for later this year, followed by Chair Jerome Powell’s press conference. Technically, AUD/USD is above the 50/100/200-day averages near 0.69, with RSI near 55. Support is around 0.7040 and 0.6980, with resistance at 0.7150 and 0.7210.

Policy Divergence And Trading Implications

The landscape has shifted considerably from this time in 2025. We remember the Australian Dollar trading above 0.7100 after the RBA hiked, but today it struggles around 0.6550. This weakness reflects a fundamental divergence in central bank policy that has developed over the last year. Last year, the RBA was still raising its cash rate to 4.10% amid a hawkish debate. Now, the rate sits at 3.60%, and the central bank’s tone is decidedly more cautious, with the latest quarterly CPI data showing inflation has eased to 3.4%. This suggests their next move is more likely a cut than a hike, putting sustained pressure on the currency. Meanwhile, the US Dollar Index, which was below 100 in March 2025, is now trading firmly around 104.50. This strength is underpinned by a Federal Reserve that has held rates in the 5.00-5.25% range, citing persistent core inflation and a surprisingly robust labor market that added over 250,000 jobs last month. The market’s expectation of a single rate cut has evaporated, replaced by a “higher for longer” narrative from the Fed. For derivative traders, this environment suggests that selling rallies in AUD/USD remains the primary strategy. Buying put options on the AUD/USD offers a direct way to profit from further downside while defining risk. For those with a more neutral but bearish view, selling out-of-the-money call spreads could be an effective way to collect premium as long as the pair remains capped. Looking at the charts, the key support we were watching at 0.6900 in 2025 is a distant memory. The immediate focus is now on the 0.6500 psychological level, a break of which could trigger a swift move toward the lows seen in late 2025. Any rallies are likely to find significant resistance near the 50-day moving average, currently around 0.6620. Create your live VT Markets account and start trading now.

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