Arguably the story of last week was the AUD/USD and its massive rally. After some positive trade balance figures and an upbeat China situation, the Aussie ran sharply higher.

Price closed out the week, just below the all-important 0.7200 level, after getting as high as 0.7250.

This week the AUD/USD will again be in focus as the RBA meets to release its official interest rate decision.

While there is little to no chance of a hike, the outlook for when hikes might begin is the question economists across Australia are asking.

There is starting to be significant pressure on housing prices, where Sydney and Melbourne, our two biggest cities have seen significant price falls in the last 12 months.

If rates start rising that will really put some pressure on the economy and risk a severe correction. That is something the RBA won’t want to do, so I suspect that are growing ever more reluctant to hike rates in 2019.

Some guidance around that they are thinking is certainly going to be the big focus this week.

Aussie Outlook

The AUD/USD is trading above the major level at 0.7200 after tagging 0.7250.

The rally has come in part, because of the local and Chinese news, but just as much as been the fact that the USD has weakened.

The AUD/USD has been sold hard all year and we have been in this price channel. This looks like it might finally be the time for the breakout to hold and that could mean we do have the potential for some more upside.

Personally, I just don’t see too much bullish action. The US is on a hawkish path, while I feel the Aussie economy just can’t handle the rate hikes at the moment. And that will likely see both rates remain at record lows and the AUD seriously lag the USD.