- The Reserve Bank of Australia kept its interest rates at 4.10%.
- The RBA cautioned that further tightening might be necessary to control inflation.
- Data indicated a further decline in US manufacturing in June.
Today’s AUD/USD outlook is slightly bullish. The Reserve Bank of Australia maintained its interest rates at 4.10% to evaluate the impact of previous increases. However, it cautioned that further tightening might be necessary to control inflation. As a result of the RBA’s decision, the Australian dollar declined by 0.3% to $0.6654. It, however, later recovered.
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Sean Callow, from Westpac, stated, “The RBA’s decision to keep rates steady may only have a minor effect on the Australian dollar. Most investors had expected it, and there were no significant changes in the statement.”
Given the slight decrease in inflation in May, markets leaned towards an unchanged outcome. On the other hand, economists were divided, with 16 out of 31 polled by Reuters expecting a rate hike and the remaining predicting the RBA to hold steady.
Meanwhile, the dollar rose on Monday following data indicating a further decline in US manufacturing in June. It reached levels last seen during the initial wave of the COVID-19 pandemic.
Investor attention this week will focus on nonfarm payroll data and the jobs report to gain insights into the broader labor market in the United States. Additionally, the US Federal Reserve’s June meeting minutes will come out on Wednesday.
According to the CME FedWatch tool, markets are currently pricing in an approximately 87% probability of a 25 basis point rate hike in the upcoming Fed meeting at the end of the month.
AUD/USD key events today
After the RBA policy meeting, investors are not expecting any important economic releases from the US or Australia.
AUD/USD technical outlook: Supported by 30-SMA support
Bulls have taken over in the 4-hour chart, reversing the bearish trend and changing the AUD/USD bias to bullish. Currently, the price trades above the 30-SMA, and the RSI indicates strong bullish momentum above 50.
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The bulls broke above the 30-SMA before retesting it. Now, the price is bouncing off the SMA and looks set to retest the 0.6700 resistance level. The price will likely break above this resistance if bulls are strong enough, with the next target at 0.6750.
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Saqib Iqbal
