- Markets have reduced bets on more aggressive hikes from the RBA.
- The RBA will continue raising rates to tame inflation.
- Powell maintains a hawkish stance regarding rate hikes.
Today’s AUD/USD forecast is bullish. Investors have ignored comments from the RBA governor about slowing the pace of rate hikes. After five rate rises in many months, Australia’s top central banker hinted on Thursday that the bank’s policy tightening would slow. This contributed to a bond rally as markets reduced their bets on more aggressive actions.
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In a speech on the outlook for policy, Reserve Bank of Australia (RBA) Governor Philip Lowe indicated that while the RBA Board was not following a predetermined course and was mindful that rates had already increased significantly. More rate hikes would be necessary to keep inflation under control.
” We recognise that all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises,” said Lowe.
Interest rates have increased by a steep 225 basis points since May after the RBA raised them by half a point on Tuesday, reaching a seven-year high of 2.35%.
On Friday, the dollar took a break from its rapid surge as markets processed additional aggressive Fed remarks. This saw AUD/USD rising.
Although Federal Reserve Chair Jerome Powell reiterated the central bank’s tough stance against inflation, overnight currency movements were calmer.
AUD/USD key events today
There won’t be any significant news releases today from the United States or Australia. However, the investors await US CPI data due next week that may significantly impact the directional bias of the Aussie.
AUD/USD technical forecast: Bulls heading towards 0.6850
The 4-hour chart shows a breakout to the upside. AUD/USD has been confined in a down trending wedge for some time but has finally broken above the wedge resistance. The pair found solid support at the 0.67001 key psychological level, and buyers took over, pushing the price beyond 0.67739. The price broke above the 30-SMA, confirming the change in trend. RSI trades above 50, showing a shift in sentiment.
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Bulls are making an impulsive move but will likely pause at 0.68510, which is a strong resistance level. This might allow short-term bears to come in and push the price to retest the 30-SMA before the bullish trend continues. The bias here will remain bullish if the price stays above the 30-SMA.
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