- The RBA raised interest rates to an 11-year high on Tuesday.
- In the first quarter, Australia’s gross domestic product only rose by 0.2%.
- Market expectations indicate a 60% probability of another RBA rate hike occurring in July.
Today’s AUD/USD forecast is bullish. The Australian dollar stayed near its highest level in three weeks following the Reserve Bank of Australia’s decision to raise interest rates to an 11-year high on Tuesday.
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Furthermore, Governor Philip Lowe indicated that there could be additional rate hikes in the future, despite the heightened risk of an economic downturn.
Meanwhile, Australia’s economy experienced its slowest growth in 1-1/2 years last quarter, as elevated prices and increasing interest rates dampened consumer spending. Indications suggest further weakness due to high borrowing costs and a global growth slowdown.
According to data released by the Australian Bureau of Statistics on Wednesday, the real gross domestic product in the first quarter only rose by 0.2%. This figure represents a decline from the 0.5% growth in the previous quarter and falls short of the expected 0.3% forecast. Moreover, annual growth stood at 2.3%, missing the projected 2.4% expansion.
The report revealed initial signs of diminishing domestic price pressures. It also highlighted that households save less to cope with high living costs and increased mortgage rates.
The Reserve Bank of Australia has responded to price pressures by raising its cash rate by 400 basis points since last May, reaching an 11-year peak of 4.1%. Moreover, it has indicated that further tightening may be necessary. Market expectations indicate a 60% probability of another rate hike occurring in July.
AUD/USD key events today
The pair will likely consolidate as investors are not expecting any important economic releases from Australia or the US.
AUD/USD technical forecast: Bullish momentum fades as 0.6700 resistance looms.
On the charts, AUD/USD is approaching the 0.6700 resistance level after breaking above the 0.6650 resistance. The bullish bias is strong, but bulls are getting tired, as seen in the smaller candle sizes.
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The RSI in the overbought region might allow bears to return for a retracement. A pullback would likely retest the 0.6650 support before bulls seek to make new highs. The bullish trend will remain if the price stays above the 30-SMA.
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Saqib Iqbal
