Where is AUDUSD Headed After the Neutral RBA?

The USD to AUD exchange rate has been exhibiting volatility, but it keeps fluctuating within a narrow 1-cent range. Despite today’s RBA meeting, which typically influences the Australian dollar, the exchange rate remained within this defined range. Technical indicators, particularly moving averages, are currently exerting influence on the forex pair’s movements.

RBA is holding steady, not lowering rates anytime soon

Both the Reserve Bank of Australia (RBA) and the Federal Reserve (FED) have maintained their interest rates unchanged, but there is speculation that the RBA might announce a rate cut this week, potentially causing a sharp decline in the Australian dollar. Following the release of disappointing US Consumer Price Index (CPI) inflation data last Wednesday, the AUD/USD pair experienced a significant upward surge.

AUD/USD Chart Daily -The Range HoldsChart AUDUSD, D1, 2024.06.18 00:30 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

This move allowed the pair to break above the 200-day Simple Moving Average (SMA), especially after trading near the lower end of its recent range the previous week. On the daily chart, support levels were observed around the 100-day SMA (red). However, the AUD/USD pair retraced some of its gains from the previous session as the US Dollar (USD) regained strength later in the week. This renewed USD upside bias reversed the pair’s upward momentum on Wednesday night, keeping the price subdued until the end of the week.

Summary of RBA’s Recent Meeting and Statements:

RBA Decision:

  • Cash Rate: Remains unchanged at 4.35%, as expected.

Key Points from the RBA Statement:

  1. Inflation:
    • Inflation has significantly declined since its peak in 2022.
    • The process of bringing inflation back to the target range is ongoing and challenging.
    • Current inflation is easing but at a slower pace than previously anticipated.
    • It will take some time before inflation is sustainably within the target range.
    • The RBA is vigilant about upside risks to inflation and remains committed to returning inflation to target within a reasonable timeframe.
  2. Labour Market:
    • Conditions have eased but remain tighter than is consistent with sustained full employment and target inflation.
    • The RBA acknowledges uncertainties regarding the lag in monetary policy effects.
  3. Economic Outlook:
    • The outlook remains uncertain, and the path to returning inflation to the target is not expected to be smooth.
    • The RBA emphasizes the need for confidence that inflation is moving sustainably towards the target.
  4. Policy Stance:
    • The RBA is not ruling out any policy options to ensure inflation returns to target.
    • The final paragraph and forward guidance largely mirror the language used in the May statement.

Remarks by RBA Governor Michele Bullock:

  • Policy Decisions:
    • There was a discussion about whether to hike rates but decided to maintain the current policy stance.
    • The use of the term ‘vigilant’ does not imply an imminent rate hike.
    • The RBA did not consider a rate cut in this meeting and does not see the case for a rate hike increasing at this point.
  • Economic Conditions:
    • Emphasized the challenge of getting accurate inflation readings with quarterly data.
    • Acknowledged that high rates are affecting some sectors negatively but reiterated that inflation also harms people, emphasizing the focus on reducing inflation.
  • Future Outlook:
    • The RBA needs a lot of factors to align to bring inflation back to the target range.
    • Remains alert to the risks but cautious in policy adjustments.

Market Implications:

  1. AUD/USD Exchange Rate:
    • Volatility: The exchange rate remains volatile within a narrow range, influenced by recent economic data and central bank policies.
    • Support and Resistance: Moving averages are providing significant support and resistance levels. The 100 SMA (red) and 200 SMA (blue) on the daily chart are crucial levels to watch.
  2. Interest Rates and Economic Data:
    • RBA’s Stance: The RBA’s cautious approach and emphasis on vigilance against inflation suggest that any future rate changes will be data-dependent.
    • US Data Impact: Upcoming US Retail Sales data and other economic indicators will also play a critical role in influencing the AUD/USD pair, especially considering the mixed performance of the USD recently.
  3. Investor Sentiment:
    • Inflation Concerns: Persistent inflation concerns and the RBA’s acknowledgment of the challenges ahead may keep investor sentiment cautious.
    • Labour Market: Continued tightness in the labour market and the potential impact on wage growth and inflation will be key factors to monitor.

AUD/USD Live Chart

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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