AUD/USD: Major bullish breakout of Aussie ahead of RBA

[Ben Graham]

Key takeaways

• Hotter-than-expected October trimmed CPI and hawkish RBA communication have sharply reduced rate-cut expectations for 2026, with markets now pricing a >70% chance of a hike by end-2026.
• Australia’s 2-year and 10-year bond yield premiums over US Treasuries have widened to multi-year highs, boosting the appeal of AUD-denominated assets and supporting medium-term AUD/USD strength.
• AUD/USD maintains a short-term bullish bias above 0.6605, supported by a major trendline breakout, firm MACD momentum, and an RSI rebound from near-oversold levels.

The hawkish parliamentary speech from RBA Governor Bullock in the past week and the latest monthly trimmed Australia’s mean CPI data for October 2025, which came in hotter than expected at 3.3% y/y (consensus: 3%, September: 3.2%), and breached above the upper limit of the RBA’s inflation target band of 2%-3% has significantly reduced interest rate cuts expectations in 2026.

The Australian central bank (RBA) has cut its policy cash rate three times by 25 basis points each so far in 2025, in February, May, and August. Lowering the cash rate from a 13-year high of 4.35% in January 2025 to its current level of 3.6%.

In today’s rate-setting meeting, the RBA has maintained a hold on its policy cash rate at 3.6% for the third time as expected, and it is likely the end of its current interest rate cut cycle, as interest rate futures are pricing in over a 70% chance of an interest rate hike by the end of 2026.

All eyes and ears on RBA Governor Bullock’s press conference next at 4.30 am GMT.

Australian sovereign bonds’ yield premium increases at a faster pace over US Treasuries

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Fig. 1: Australian 2-YR & 10-YR sovereign bond yields spread over US Treasuries as of 9 Dec 2025 (Source: TradingView)

In the past week, the Australian 10-year sovereign bond yield premium over US Treasuries has widened to 56 basis points (bps) at this time of writing, its widest spread since August 2022.

The 2-year Australian sovereign bond yield, which is more sensitive to the RBA’s monetary policy stance, has also widened significantly over US Treasuries to 43 bps, its highest level in eight years.

A widening yield premium of Australian sovereign bonds over US Treasuries increases the appeal of AUD-denominated assets, setting the stage for further medium-term strength in the AUD/USD exchange rate.

Let’s now focus on the latest technical analysis elements, the short-term trajectory (1 to 3 days), and key levels to watch for in AUD/USD.

Preferred trend bias (1-3 days) – Watch the key short-term support at 0.6605

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Fig. 2: AUD/USD medium-term trend as of 9 Dec 2025 (Source: TradingView)

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Fig. 3: AUD/USD minor trend as of 9 Dec 2025 (Source: TradingView)

Bullish bias above 0.6605 short-term pivotal support for the AUD/USD, with intermediate resistance coming in at 0.6660, and above it sees 0.6690/6700 next (minor swing high area of 17/18 September 2025) (see Fig. 3).

Key elements

• A major bullish breakout has occurred on the AUD/USD, where it has recorded a daily and weekly close above a former long-term descending trendline resistance that capped previous rallies since the 25 February 2021 high, now turns into pull-back support at 0.6605 (see Fig. 2).
• The daily MACD trend indicator has continued to trend upwards steadily above its centreline, which suggests a potential medium-term uptrend phase is in progress for AUD/USD (see Fig. 2).
• The hourly RSI momentum has rebounded after retesting its key support level at 33.3 during the US session on Monday, 8 December, which is just a whisker above its oversold region (below 30) (see Fig. 3).

Alternative trend bias (1 to 3 days)

Failure to hold at the 0.6605 key short-term support negates the bullish tone on the AUD/USD to expose a deeper minor corrective pull-back towards the next intermediate supports at 0.6580 and 0.6555.

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