- The RBA minutes contained no significant surprises regarding the rate outlook.
- The RBA maintained its cautionary statement that some tightening might still be necessary.
- The market sentiment leans towards the RBA pausing in August.
Today’s AUD/USD price analysis is slightly bearish. The Aussie fell after the release of Tuesday’s Reserve Bank of Australia’s (RBA) July policy meeting minutes. Unfortunately, the minutes contained no significant surprises regarding the rate outlook.
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This month, the central bank maintained interest rates at the current level due to an already restrictive policy. Furthermore, there was a concern that tightening financial conditions could negatively impact household finances. This would likely lead to a severe economic downturn and higher unemployment.
However, the RBA maintained its cautionary statement that some tightening might still be necessary to control inflation. Moreover, the bank remained wary of the broader effects of inflation, such as rising rents, weak productivity, and higher electricity prices.
Additionally, the minutes revealed that the RBA board considered a 25-basis-point increase in the cash rate to 4.35%. However, it ultimately decided to pause, recognizing the strength of both arguments.
Tapas Strickland from National Australia Bank noted that the RBA minutes did not provide much new information compared to Governor Lowe’s recent speech. In that speech, Governor Lowe seemed less definitive about the need for further rate hikes. Additionally, he was more attentive to potential risks to economic growth.
Strickland observed a similar tone in the minutes, although a strong case for additional tightening was presented. The market sentiment leans towards the RBA pausing in August. However, a quarter-point interest rate increase by the end of the year has already been fully priced in.
AUD/USD key events today
The focus for investors today will be the retail sales report from the US. This major economic report might influence the Fed’s policy outlook.
AUD/USD technical price analysis: Bears test the uptrend at the 30-SMA.
On the charts, bears are on the verge of breaking below the 30-SMA and the 0.6800 support level. This comes after a sharp pullback in the uptrend. Furthermore, the RSI is also challenging the pivotal 50-level.
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There is a battle between bulls and bears at the SMA, but bulls have the upper hand as the price faces a strong support zone. Therefore, the price will likely bounce higher toward the 0.6900 resistance. However, if bears take over, we might see a drop to 0.6700.
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Saqib Iqbal
