- The RBA kept interest rates unchanged on Tuesday and reduced hopes of a cut this year.
- The probability of an RBA rate cut in November fell from 88% to 55%.
- The ISM released data showing an increase in business activity in the US service sector.
AUD/USD price analysis shows bears in favor as Aussie falls despite tough RBA policy meeting. Notably, the dollar recovered as fears of a US recession eased after upbeat economic data.
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The RBA kept rates unchanged on Tuesday, dashing hopes of a rate cut this year. Policy makers have noted that inflation will decline at a more gradual pace. Moreover, officials discussed raising interest rates but decided to keep them steady.
The RBA has remained largely hawkish, with markets expecting the first rate cut next year. However, the recent CPI report has changed this perspective. Core inflation eased more than expected in the second quarter, so investors were hoping for a more dovish outlook at the meeting.
Unfortunately, that was not the case. After the meeting, the probability of an RBA rate cut in November fell from 88% to 55%. The Aussie gained after the meeting but soon fell as focus shifted to the rebounding dollar.
On Monday, the ISM released data showing an increase in business activity in the US services sector. The PMI rose to 51.4, beating expectations for a rise to 51.0. This report allayed some of the fears that the economy was headed for recession. Moreover, it led to a slight decline in Fed rate cut expectations.
AUD/USD key events today
After the RBA policy meeting, investors do not expect major reports. Therefore, they will continue to absorb the outcome of the meeting.
AUD/USD Price Technical Analysis: RSI Bullish Divergence
On the technical side, the AUD/USD price is falling after retesting the 30-SMA resistance. Initially, the bulls broke through the SMA, intending to take control. However, they were unable to sustain the move, allowing the Bears to regain control. With this new momentum, the price could return to the 0.6400 support level.
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However, recent price action shows that the bears are struggling to price lower. Notably, the RSI has made a strong bullish divergence, indicating weaker bearish momentum. Furthermore, the price mostly stayed close to the 30-SMA. Therefore, if the bears cannot continue lower, the price could break above the 30-SMA and resistance at 0.6550.
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