AUD/USD Outlook: Markets Expect Another 25bps RBA Rate Hike

• Australia’s central bank is anticipated to raise interest rates by 25bps.

• Australia’s inflation slowed to an eight-month low of 6.8% in February.

• Oil producers declared Sunday that they would reduce output by an additional 1.16 million bpd.

Today’s AUD/USD outlook is bullish. On Tuesday, Australia’s central bank is anticipated to raise interest rates by a final 25 basis points to 3.85%. However, predictions from economists surveyed by Reuters indicate that the decision to raise or hold rates is extremely close.

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Inflation in Australia reached a more than three-decade high of 7.8% in the most recent quarter, far exceeding the central bank’s goal range of 2%–3%. However, as it did in December, the bank again hinted this month that the current tightening cycle might end.

A new monthly measure of Australian consumer prices strengthened the argument for a pause in rate hikes. It revealed that inflation slowed to an eight-month low of 6.8% in February from 7.4% the previous month.

Traders bet that the Federal Reserve may need to raise interest rates at its next meeting as inflation fears resurfaced following a surprise statement by major oil producers to cut output even more. As a result, the US dollar was generally higher, capping AUD/USD gains.

The reductions were made public even before a virtually convened meeting of the OPEC+ ministerial panel. It was anticipated to maintain the 2 million barrels per day (bpd) reductions already in force until the end of 2023.

Instead, the oil producers declared Sunday that they would reduce output by an additional 1.16 million bpd.

AUD/USD key events today

Investors will pay attention to PMI data from the US that will give insight into the level of business activity in the manufacturing sector.

AUD/USD technical outlook: Bulls take over after the 0.6650 support

The daily chart shows AUD/USD trading above the 30-SMA with the RSI crossing above 50. This shows that bulls have gotten stronger and taken over from bears, who failed to break below the 0.6650 support level.

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On a larger scale, the price moves sideways without clear direction, bouncing between the 0.6650 support and the 0.6725 resistance. With the bullish momentum, we will likely see the price retest the 0.6725 resistance.

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