- RBA hiked rates by 50bps.
- The RBA stated it had more work to do regarding inflation.
- AUD/USD remained unchanged as markets had already priced in the hike.
Today’s AUD/USD price analysis is bearish. As it works to contain soaring inflation, Australia’s central bank increased the cash rate by 50 basis points on Tuesday to a seven-year high of 2.35% while still leaving the door open for future tightening.
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The Reserve Bank of Australia (RBA) mentioned a “normalizing” policy as it concluded its September meeting, implying that rates were now closer to neutral. However, it also signaled that it still had work to do.
“Price stability is a prerequisite for a strong economy and a sustained period of full employment,” said RBA Governor Philip Lowe in a statement. “The Board expects to increase interest rates further over the months ahead, but it is not on a pre-set path.”
The local dollar was little changed at $0.6808 after the fifth increase since May, which had been widely anticipated.
Since inflation is already at a 21-year high of 6.1% and is anticipated to reach 7% by Christmas, markets are leaning on another half-point increase in October. Rates are expected to peak at around 3.85%.
“The Bank may only slow the pace of tightening if the Q3 inflation figures due at the end-October show a moderation in price pressures,” said Marcel Thieliant, a senior economist at Capital Economics.
AUD/USD key events today
The US will release the ISM Non-Manufacturing PMI for August, which is expected to drop from 56.7 to 55.1. This report is a leading signal of the overall economic condition in the non-manufacturing sector.
There will also be a GDP report from Australia for Q2, which is expected to show an expansion of 0.2% from Q1.
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AUD/USD technical price analysis: Counter-trend buyers preventing a plunge below 0.67739
The 4-hour chart shows the price trading slightly below the 30-SMA and RSI below 50, confirming the downtrend. However, the price has been unable to break below the 0.67739 support level. Buyers come in every time the price gets to this level.
This downtrend will make new lows if the price can break below 0.67739. If support holds, the price will likely retest resistance at 0.68510.
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Saqib Iqbal
