AUD/USD Price Outlook: Aussie Flops Near $0.7053 as RBA Hawks Face Off with a Strong Greenback
The AUD/USD pair is having trouble gaining ground during the European session and is trading close to $0.7053. Even with the Reserve...
Quick overview
- The AUD/USD pair is struggling to gain traction, currently trading around $0.7053, after hitting an intra-day low of $0.7044.
- The Reserve Bank of Australia has raised the cash rate to 3.85% to combat persistent inflation, with further hikes possible if inflation remains high.
- Attention is focused on the upcoming US January CPI report, which could influence expectations for a Federal Reserve rate cut and impact the Australian Dollar.
- The AUD/USD is testing a key support level at $0.7030, with potential bullish and bearish scenarios depending on whether it holds above or falls below this level.
The AUD/USD pair is having trouble gaining ground during the European session and is trading close to $0.7053. Even with the Reserve Bank of Australia (RBA) taking a firm stance, the pair dropped to an intra-day low of $0.7044 as traders consider the uncertain policy outlook and the strength of the US Dollar.
RBA is Not Playing: Rates Hiked to 3.85%
The RBA recently increased the cash rate to 3.85%, moving away from earlier rate cuts to address persistent inflation. RBA Assistant Governor Sarah Hunter notes that the labor market remains “a bit tight” and that inflation is unlikely to reach the 2-3% target soon.
Governor Michele Bullock stated that any inflation “with a three in front of it” is unacceptable, suggesting that more rate hikes are possible if inflation remains high.
US CPI: The Ultimate Vibe Check
Attention is now on the US January CPI report. Headline inflation is expected to decrease to 2.5% from 2.7%, and core inflation may also fall to 2.5%. If the data is lower than expected, it could increase expectations for a Federal Reserve rate cut later this year, which may help the Australian Dollar recover.
With Kevin Warsh nominated to lead the Federal Reserve in May, markets are anticipating a move toward a smaller balance sheet and possibly more aggressive rate cuts.
AUD/USD Forecast: Bulls Defending $0.7030 as Trendline Support Gets Tested
On the 4-hour chart, AUD/USD is trading around $0.7056, retreating after not breaking through the $0.7144 resistance zone. The price is moving closer to a key rising trendline near $0.7030, which has supported buyers since early February.
The 50-EMA near $0.6987 and the 200-EMA at $0.6888 are both trending upward, indicating that this decline may be a temporary pause rather than a full reversal. However, recent price action shows a “lower high” pattern, suggesting that some traders are taking profits.
- Bullish Scenario: If the price stays above $0.7030, a rebound toward $0.7094 and $0.7144 is possible.
- Bearish Scenario: If the price falls below $0.7030, it could decline to $0.6985 or even $0.6945.
Trade Idea: Watch for a confirmed bullish bounce above $0.7030 to target $0.7095, with a stop loss set below $0.6985.
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