AUD/USD turned bearish in summer and has been falling since then, owing mostly to a stronger US dollar, but also to global concerns that have driven traders away from risk assets. China’s economy has faced serious challenges this year across a variety of industries, sending this pair below 0.63 but the price formed a base there and this pair rebounded higher last week but stopped at the 100 SMA ahead of the RBA decision.

This forex pair consolidated around the 0.63 level for a couple of weeks first, as a triangle was forming, with moving averages pushing the highs lower. Then came the reversal last week, pushing that price above the 50 SMA (yellow) which has been acting as resistance. But the move higher stalled at the 100 SMA (green) ahead of the Reserve Bank of Australia Meeting, which was held last night.

Economists agree on a +25 basis point increase in CRT to 4.35%, with all four major Australian banks forecasting an RBA boost as well. On the other hand, it is too early to identify a turning point in the US rate cycle, but anticipation that the Fed’s next step will be cut in 2024, at a time when the RBA is commencing rises, provides the AUD a good opportunity to move away from the lows of 0.62-0.63.

Reserve Bank of Australia Cash Rate Decision

• RBA raises the csh rate from 4.10% to 4.35%
• Board remains resolute in its determination to return inflation to target
• CPI inflation is now expected to be around 3½ per cent by the end of 2024 and at the top of the target range of 2 to 3 per cent by the end of 2025.
• Board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe.
• Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable time frame will depend upon the data and the evolving assessment of risks
• Still significant uncertainties around the outlook
• Services price inflation has been surprisingly persistent overseas and the same could occur in Australia
• To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case
• High inflation is weighing on people’s real incomes and household consumption growth is weak, as is dwelling investment
• Wages growth has picked up over the past year but is still consistent with the inflation target, provided that productivity growth picks up
• Weight of information suggests that the risk of inflation remaining higher for longer has increased.

AUD/USD Live Chart