AUD/USD Outlook: RBA Raises Rates with a Possible End to Hikes

• Australia’s central bank increased its cash rate to the highest level in over a decade.

• The RBA omitted any mention of future rate “increases.”

• The US dollar was weak on Tuesday as investors awaited the testimony of Jerome Powell.

Today’s AUD/USD outlook is bearish. On Tuesday, Australia’s central bank increased its cash rate to the highest in over ten years. However, it also signaled that it might have reached the end of its tightening cycle. This is because consumer spending decreased, and there was less chance of a wage-driven inflation blowout.

The Reserve Bank of Australia (RBA) concluded its March policy meeting by increasing its official cash rate by a widely anticipated 25 basis points to 3.6%. It was the 10th consecutive change since last May, when rates were at an all-time low of 0.1%.

In a dovish move, the central bank omitted any mention of future rate “increases.” Instead, it stated that “additional tightening” would be required, implying that just one more increase might be sufficient.

Since last May, rates have increased by 350 basis points, making this the central bank’s most aggressive tightening campaign in recent history.

Markets responded by driving the local currency down to $0.6690, a new two-month low. Investors put in a larger likelihood that the RBA will pause at 3.85% rather than continuing to 4.10% or higher.

Governor Philip Lowe noted that wage growth is consistent with the inflation target. Recent data indicate a reduced danger of a cycle in which wages and prices chase one another.

The US dollar was weak on Tuesday as investors awaited the testimony of Jerome Powell, the chair of the US Federal Reserve.

AUD/USD key events today

Powell’s testimony before Congress on Tuesday and Wednesday will be the center of investor attention.

AUD/USD technical outlook: Bears challenging the 0.6702 range support

The 4-hour chart shows AUD/USD trading within a tight range, with support at 0.6702 and resistance at 0.6775. This comes after a strong downtrend and might be a pause before the downtrend continues.

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Bears are currently in control in the range area as the price trades below the 30-SMA with the RSI below 50. Bears are challenging the range support and might break below with enough strength. However, if the support holds, the price will likely remain in the consolidation, with bulls taking over to retest the range resistance.

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