The Australian Dollar barely reacted to the hawkish sets of RBA minutes. Instead, AUD/USD drifted lower in Asian trading, suggesting investors are no longer judging the Reserve Bank by what it says, but by what they believe it can realistically do.
On paper, the minutes kept August very much alive. Policymakers reiterated that monetary policy “needed to remain restrictive” and made clear they were prepared to raise the cash rate again “if necessary.” Yet markets had already priced in that rhetoric. What stood out instead was the Board’s emphasis on using time to assess how previous tightening is flowing through the economy. Investors interpreted that not as a prelude to another hike, but as confirmation that the RBA is firmly in watch-and-wait mode.
The market’s skepticism reflects growing concern about Australia’s domestic economy rather than any loss of confidence in the RBA’s commitment to fighting inflation. Consumer sentiment remains close to its weakest level in half a century, while the housing market is showing increasingly clear signs of cooling after three rate hikes this year. Those conditions raise the economic cost of further tightening. As a result, many investors view the RBA’s tough language as a form of “open-mouth operations”—using hawkish communication to restrain inflation expectations without necessarily intending to follow through with another immediate rate increase.
That leaves the Australian Dollar dependent on developments abroad rather than at home. Thursday’s US Non-Farm Payrolls report may prove far more important for AUD/USD than the RBA minutes themselves. A strong payrolls report would reinforce the Dollar’s advantage and could push the pair through the key 0.6832 support level. A weaker report, however, could allow AUD/USD to stabilize, although a sustained recovery may still require investors to regain confidence that the RBA is capable—not just willing—to tighten policy again.
Technically, the decline from the 0.7277 medium-term high remains in progress, with 0.6832 acting as the next major support level. A decisive break there would expose 38.2% retracement of 0.5913 to 0.7277 at 0.6756.
For now, however, the broader pullback is still viewed as a correction within the larger uptrend from the 2024 low at 0.5913, suggesting strong buying interest could emerge around the 0.6756 area. Initial resistance is seen at 0.6926, while 0.6977, a former support level, is expected to cap any recovery.
