Invest in AUDUSD with 0.70500 in sight on RBA rate hike expectations

Following a recent pullback from the July 21 high of 0.70848, the AUDUSD pair is now flying around 0.69720. Volatility remains subdued ahead of the Federal Reserve (Fed) meeting on July 28–29.

According to CME FedWatch data, the probability of a July rate hike has recently jumped from last week’s 16% to 36%–38%. A September raise looks like almost a done deal, with forecasts surging to 81%. This is a favorable environment for the US dollar, which is also underpinned by strong durable and capital goods orders—a clear sign of steady demand amid robust investment flows in artificial intelligence (AI). These factors confirm the resilience of the American economy and provide solid support for the greenback in the short term.

Across the Pacific, the picture is more mixed. Reserve Bank of Australia (RBA) Governor Michele Bullock has signaled her willingness to increase borrowing costs if necessary. And there are serious reasons to do so: persistent core inflation and an overheated labor market. A strong June employment report, which showed a surge of 76,300 jobs against the expected 15,000, has further fueled hawkish expectations. However, the Aussie’s reaction to Bullock’s comments has been rather muted, as traders appear determined to wait for Q2 inflation data—due Wednesday—before rushing into decisions.

On the technical side, AUDUSD is currently trading at 0.69720, within a medium-term uptrend that formed after quotes dropped to 0.68643. Previously, the Stochastic Oscillator signaled a weakening of bullish momentum when its %K and %D lines crossed from top to bottom after exiting overbought territory above 80. This preceded the current corrective decline from the local peak. Now, the indicator has begun to turn upward near the oversold line, approaching the zone below 20, suggesting that the market is no longer overheated and the pair may soon resume its rally.

Consider the following trading strategy:

Buy AUDUSD from 0.69550. Place Take profit at 0.70500 and Stop loss at 0.69100.

The forecast remains relevant between July 28 and August 4, 2026.