- The Reserve Bank of Australia will likely lift its interest rate by 25 basis points.
- The latest monthly consumer price index revealed a slowdown in Australia’s inflation to 5.6%.
- Data revealed an unexpected decline in new claims for unemployment benefits in the US.
Today’s AUD/USD outlook is slightly bullish. On Tuesday, the RBA will likely raise its interest rate by 25 basis points to 4.35% to control persistent high inflation. However, economists in a Reuters poll indicated that the decision to raise or hold the rate was closely contested.
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Although the latest monthly consumer price index revealed a slowdown in inflation to 5.6% in May from 6.8% in April, it still exceeded the RBA’s target range of 2-3%. This suggests that further tightening might be necessary. However, the RBA’s previous pause in April, followed by rate hikes in May and June, has divided opinions among economists regarding the next move.
Adelaide Timbrell, a senior economist at ANZ, commented that the strong employment growth and ongoing inflationary pressures make a hike more probable. Among major local banks, ANZ, NAB, and Westpac anticipate a rate hike on Tuesday, while CBA predicts no change.
Elsewhere, the US dollar remains strong. The dollar will likely reverse two quarters of losses against six major peers. This is due to betting on the US Federal Reserve’s continued efforts to raise interest rates.
Moreover, data revealed an unexpected decline in new claims for unemployment benefits in the US last week. Additionally, the Commerce Department raised its first-quarter gross domestic product estimate on the same day.
AUD/USD key events today
Traders will receive the core PCE price index, an important inflation measure used by the Federal Reserve. Analysts expect a drop in this measure, further showing easing US inflation.
AUD/USD technical outlook: Price consolidates as 30-SMA resistance catches up.
On the 4-hour chart, the price mostly moves sideways after pausing at the 0.6550 support level. The major trend is bearish as the price trades below the 30-SMA. Furthermore, there is strong bearish momentum because the RSI trades below 50.
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This pause in the downtrend could be a resting place for bears as the 30-SMA resistance catches up. Therefore, bears might soon return when the price encounters the 30-SMA resistance. They will likely break below the 0.6550 support and make lower lows.
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Saqib Iqbal
