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AUD/USD Forecast: Slumps Despite RBA’s Rate Hike Affirmation

  • Steadily rising US inflation suggested interest rates would remain high for longer.
  • The yearly US inflation figure of 6.4% was slightly higher than expected.
  • RBA governor Philip Low reaffirmed that interest rates had not peaked.

Today’s AUD/USD forecast is bearish. The dollar was on the rise on Wednesday after a positive inflation report. Steadily rising US inflation suggested interest rates would remain high for longer than anticipated.

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The increase in food and rental prices was mostly responsible for January’s headline CPI of 0.5%. That was in line with what was anticipated. But the yearly figure of 6.4% was a little higher than expected.

The governor of the Reserve Bank of Australia reaffirmed that interest rates had not peaked on Wednesday. He added that he was unsure of how high they needed to go as the central bank attempted to follow a narrow path in controlling inflation to a soft landing.

RBA Governor Philip Lowe told lawmakers that achieving this goal and averting a recession hinged on moderating wage increases.

The third quarter saw a 3.1% increase in wages over the same period last year.

The RBA most recently increased interest rates on February 7 and promised additional increases would follow. Markets responded by increasing the policy rate’s anticipated peak from 3.6% to about 4.2%, indicating at least three more increases.

Consumer prices were 7.8% higher than they had been a year ago, according to a shocking fourth-quarter inflation report released on Jan. 25. The RBA predicts that inflation will have returned to its target range of 2% to 3% by mid-2025.

However, the focus was on the US inflation report, which boosted the dollar and weakened the Australian dollar.

AUD/USD key events today

Investors will pay attention to retail sales data from the US that will show the state of consumer spending in the country.

AUD/USD technical forecast: No clear direction 

AUD/USD technical forecast

The 4-hour chart shows AUD/USD chopping through the 30-SMA, a sign that there is no clear direction in the market. Bears are, however, stronger as the price has pushed below the 30-SMA with the RSI below 50.

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However, bears are approaching a strong support level at 0.6875, where the price will likely pause and bounce higher. A break below this support will give direction to the market as bears will have won the battle at the 30-SMA.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.