- Australia’s Q1 inflation data was stronger than expected.
- Investors expected the RBA to return to its hawkish stance.
- RBA Governor Michelle Bullock said interest rates are at the right level to reduce inflation.
The AUD/USD outlook changed, with the Aussie falling after the Reserve Bank of Australia denied any hawkish signals. Given Australia’s recent upbeat data, investors expected a more hawkish tone at the meeting. They were, however, disappointed when the central bank claimed that inflation was falling.
–Are you interested in learning more about copy trading platforms? Check out our detailed guide-
The Reserve Bank of Australia kept interest rates on hold on Tuesday, suppressing expectations of a rate hike. Australia’s Q1 inflation data was stronger than expected. Meanwhile, the labor market remains resilient. As a result, investors expected the RBA to return to its hawkish stance and possibly signal a rate hike in the future.
However, RBA Governor Michelle Bullock said interest rates are at the right level to reduce inflation to the central bank’s target. This increased the chance that the RBA’s next move would be a rate cut. Moreover, expectations for an increase in RBA in September fell from 43% to 16%.
However, it remains one of the few major central banks that could taper after the Federal Reserve. Therefore, there is a low risk of a divergence that would weaken the Aussie as much as other major currencies such as the Canadian dollar.
The prospect of a rate cut in the US became clearer when last week’s jobs report revealed weakness in the labor market. Still, policymakers can only gain confidence that the labor market is easing if the trend continues.
AUD/USD key events today
Investors will continue to absorb the results of the RBA meeting as no key reports are forthcoming from the US.
AUD/USD Technical Outlook: Bearish momentum hovers at 0.6575
On the technical side, the AUD/USD price has pulled back sharply from its recent highs and is approaching the critical support level of 0.6575. However, the bias remains bullish as the price continues to trade above the 30-SMA. At the same time, the RSI supports the bullish momentum above 50.
–Are you interested in learning more about forex broker scalping? Check out our detailed guide-
However, the recent increase in bearish momentum could reverse this bullish bias. Bears will take charge if the price breaks below the key support level of 0.6575 and the 30-SMA support line. If not, the price will jump higher to continue the bullish trend by breaking above the key level of 0.6650.
Do you want to trade Forex now? Invest in eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money
