AUD Strengthens Post-RBA Decision Amid Global Economic Watch

The Australian Dollar (AUD) strengthened on Tuesday following the Reserve Bank of Australia‘s (RBA) decision to maintain the Official Cash Rate (OCR) at 4.35% for the fifth consecutive meeting. This decision follows a 25 basis points hike in November 2023.

RBA Governor Michele Bullock’s hawkish stance bolstered the AUD, as the possibility of a rate cut was not considered during this meeting. Investors are now turning their attention to upcoming U.S. economic data releases, including May’s Retail Sales and Industrial Production figures, as well as speeches from Federal Reserve officials. Strong U.S. data could bolster the USD, potentially creating headwinds for the AUD/USD pair.

Key Market Movements: Australian Dollar Gains Post-RBA Rate Decision

The RBA emphasized the need for favorable economic conditions to bring inflation back within the target range. The board did not discuss a rate cut, nor did it suggest an imminent rate hike, despite high interest rates impacting some sectors. The RBA’s statement highlighted persistent inflation above the target, requiring continued vigilance to ensure a sustainable return to the target range.

In the U.S., Philadelphia Fed President Patrick Harker indicated a single rate cut might be appropriate this year if the economy performs as expected, emphasizing the need for substantial evidence of improving inflation. Additionally, the NY Empire State Manufacturing Index improved significantly to -6.0 in June from -15.6, surpassing expectations.

Market sentiment reflects a nearly 62% chance of a rate cut by the U.S. Fed on September 18, according to the CME’s FedWatch Tool.

Technical Analysis: AUD/USD Finds Support Above Key 100-Day EMA

The AUD/USD pair shows firmness, though its bullish stance remains fragile as it hovers near the 100-day Exponential Moving Average (EMA). If the pair falls below this key EMA, a further downside is likely. The 14-day Relative Strength Index (RSI) remains below the 50-midline, favoring sellers.

Potential downside targets include the 0.6580-0.6585 zone, where the 100-day EMA converges with the lower Bollinger Band. Further declines could reach 0.6510, a low from March 22, and 0.6465, a low from May 1.

Conversely, the first upside resistance lies at 0.6684, the upper boundary of the Bollinger Band. A decisive break above this level could lead to a rally towards 0.6715, a high from May 16, and further to 0.6760, a high from January 4.

The coming days will be critical for the AUD/USD pair, as economic data releases and central bank commentary shape market sentiment and trading strategies.