AUD/USD Weekly Forecast: RBA Expected to Deliver A 50bps Rate Hike

• Second quarter inflation in Australia rose to 6.1%.
• RBA is expected to deliver a 50 bps rate hike.
• There is indecision at the 0.7 psychological level.

The weekly AUD/USD forecast is bullish as the Reserve Bank of Australia is expected to respond to rising inflation with a 50bps rate hike. At the same time, if the US dollar continues falling, the pair might rally in the coming week.

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The ups and downs of AUD/USD

The pair closed the week higher after Australia’s inflation rose to 6.1%, which markets expect will push the RBA to raise interest rates further in August.

“There are no two ways about it – inflation is red hot in Australia right now, as it is in many parts of the world, and the RBA will respond by raising the cash rate again at the August board meeting next week,” said Gareth Aird, head of economics at CBA.

“Our central scenario for the RBA to raise the cash rate by 50 basis points [to 1.85%]at the August board meeting is unchanged,” he said.

This move was also supported by the US dollar’s weakness, as investors saw a higher risk of recession and a possibly less hawkish Federal Reserve.

Next week’s key events for AUD/USD

Next week is packed with significant news releases from Australia and the United States. The Reserve Bank of Australia is expected to raise interest rates by 50 basis points as it tries to tame rising inflation.

“Inflation clearly is running hot. This should keep the pressure on the RBA to move quickly towards a more neutral policy setting,” said Taylor Nugent, an economist at NAB, who sees the RBA moving by 50 bps in August and September.

Investors will also pay attention to the US jobs report, which might cause a lot of volatility.

AUD/USD weekly technical outlook: The journey back above 0.70

Looking at the daily chart, we see the price trading above the 22-SMA, showing bulls are in control. The RSI is trading above 50, favoring bullish momentum. The price has made a doji candle showing indecision at the 0.7000 level.

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The next big-bodied candle will show the final decision. A bullish candle will mean the price might retest 0.72661. A bearish candle could see the price retesting the 0.67200 level.

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