August 10th Chart of the Week: RBA monetary policy outlook and AUD/USD Technical Analysis

The Reserve Bank of Australia (RBA) is scheduled to hand down its official cash rate decision on Tuesday, August 11, 2026. According to the ASX RBA Rate Tracker¹, market pricing based on the 30-Day Interbank Cash Rate Futures indicates a 100% probability that the cash rate will remain unchanged at 4.35%, with a 0% probability of a 25-basis-point reduction to 4.10%. While recent economic data shows underlying inflation easing slightly alongside softening consumer confidence, headline inflation remains above the RBA’s 2–3% target range²; with Australia’s labor market demonstrating continued resilience³, the RBA rate tracker suggests that monetary policy experts and financial markets overwhelmingly anticipate that Governor Michele Bullock and the board will maintain a cautious stand-still approach, keeping monetary policy tight and retaining a hawkish tilt until inflationary pressures are firmly under control.

As of early 2025, the Australian dollar has been trading higher, rising from a low just below 0.6000 to a high of 0.7280, before falling back to the 0.7060 range where it is currently trading. As the war in the Middle East began, the pair fell by approximately 4.53%, from 0.7137 to 0.6835. The drop lasted for a few weeks, and the price has recovered close to its pre-war level.

The U.S. Consumer Price Index (CPI) report for July 2026 is scheduled for release by the Bureau of Labor Statistics on Wednesday, August 12, at 8:30 A.M. Eastern Time⁴. This crucial inflation data will show whether price pressures continued to moderate following June’s figures, could influence Federal Reserve expectations regarding the trajectory of benchmark interest rates, and could shape broader market sentiment in the coming weeks.

According to the Bloomberg economic calendar, the U.S. Consumer Price Index (CPI) for July is forecasted to show annual headline inflation easing slightly to 3.4%, down from 3.5% in June. Monthly, headline CPI is expected to edge up 0.1% following June’s 0.4% drop, while core CPI (excluding food and energy) is projected to rise 0.2% over the month, bringing the annual core inflation rate to approximately 2.5%⁴.

The July CPI report carries heightened significance as a critical test for the Federal Reserve amid its division ahead of its September meeting. At its July meeting, the Federal Open Market Committee (FOMC) voted 9-3 to hold the federal funds rate steady at 3.50%–3.75%. Still, three dissenting members pushed for a quarter-point rate hike due to lingering inflationary pressures and geopolitical energy shocks⁵. With Chair Kevin Warsh abandoning formal forward guidance⁶, market participants are closely watching incoming data. A hotter-than-expected CPI print could tip the scales toward a September rate hike to reinforce Fed inflation-fighting credibility. In contrast, a cooler reading would relieve pressure on the central bank and validate its hold-and-see approach.

However, it’s not as simple as it may seem; last week’s nonfarm payrolls numbers put the upcoming Fed meeting in the spotlight. When high inflation and a weakening labor market occur simultaneously - a scenario known as stagflation - the Federal Reserve faces a fundamental conflict in its dual mandate from Congress, which requires it to promote both maximum employment and price stability.

The U.S. Producer Price Index (PPI) for July 2026 is scheduled for release by the Bureau of Labor Statistics on Thursday, August 13, at 8:30 A.M. Eastern Time, coming just one day after the Consumer Price Index (CPI) report. Consensus forecasts, according to the Bloomberg economic calendar, anticipate month-over-month headline PPI growth of 0.1%, following an unexpected 0.4% drop in June. On an annual basis, headline PPI in June came in at 5.5% YoY⁴.

Because PPI measures price changes at the wholesale and pipeline levels - capturing raw materials, manufacturing intermediate goods, and wholesale profit margins - it serves as a critical leading indicator for future consumer prices.

• As of February 2025, AUD/USD has been trading within a rising, widening formation channel as marked by the blue lines on the chart.
  
• Following an upward gap in January 2026, and as the Middle East war began, price action traded within the range of 0.6810 - 0.7270 as marked by the rectangular area on the chart.
  
• As of July 1st, 2026, price action began an upward trend marked by the black line on the chart, breaking above its fast and intermediate moving averages, EMA9, SMA9, and SMA21, the monthly PP of 0.6986, the weekly PP of 0.7043, and the weekly S1 of 0.7009.
  
• The fast EMA9 and SMA9 intersect the weekly PP at 0.7043, forming an immediate level of support below price action, followed by a second support level at the intersection of the upward black trendline and the monthly pivot point at 0.6986.
  
• Relative Strength Index (RSI 14): Standing at 58.36 (with its moving average at 53.93), the RSI is in positive territory above the 50 midline. This indicates healthy upward momentum following the July rebound, while remaining well below the overbought threshold of 70, leaving room for potential upside.
  
• Stochastic oscillator (14, 1, 3): Sitting at 87.23 (%K) and 86.15 (%D), the Stochastic indicator is extended in the overbought zone (> 80). While this suggests strong buying velocity in the recent swing higher, it warns that the rally may be nearing short-term exhaustion, making the pair vulnerable to brief consolidation or a throwback.

In summary, the AUD/USD pair exhibits a robust bullish structure, with healthy upward momentum and positive RSI readings. However, with the Stochastic oscillator signaling overbought conditions, the pair may be vulnerable to short-term consolidation. Market participants should view the upcoming RBA interest rate decision and the U.S. CPI release as high-impact catalysts that could drive significant volatility and determine the next directional leg for the pair.

Abbreviation list:

EMA: Exponential moving average

SMA: Simple moving average

RSI: Relative strength index

% K: Fast stochastic

%D: Slow stochastic

MACD: Moving average convergence divergence

Pivot point: PP

Support: S

Resistance: R

Footnotes

¹https://www.asx.com.au/markets/trade-our-derivatives-market/futures-market/rba-rate-tracker

²https://www.rba.gov.au/inflation-overview.html

³https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release#employment

⁴https://www.bloomberg.com/markets/economic-calendar

⁵https://www.federalreserve.gov/newsevents/pressreleases/monetary20260729a.htm

⁶https://finance.yahoo.com/economy/policy/articles/fed-chair-kevin-warsh-refused-053500585.html