- RBA policymakers considered a rate hike at the last meeting.
- Markets imply an 84% chance of an RBA rate cut in December.
- Markets are pricing a 75.5% chance of a 25 bps Fed rate cut in September.
The AUD/USD outlook shows bullish enthusiasm, with the Aussie climbing after hawkish Reserve Bank of Australia policy meeting minutes. Meanwhile, the US dollar weakened as investors bet on a September rate cut ahead of Powell’s Jackson Hole speech.
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Minutes from the last RBA meeting, released on Tuesday, showed that policymakers had almost hiked rates due to high underlying inflation. However, after debating the risks, they decided to keep rates unchanged. The RBA is trying to balance inflation and the labor market. Higher rates could dent the jobs sector and hurt the economy. Meanwhile, the central bank will be forced to delay rate cuts if inflation remains high.
The minutes dashed hopes for a near-term rate cut. Nevertheless, markets imply an 84% chance of a rate cut in December and another in February next year.
Meanwhile, the outlook for the Fed is different. Inflation is easing as expected. At the same time, although the economy is slowing down, pockets of strength remain. Therefore, the Fed is poised to deliver a quarter-point rate cut in September. Markets are pricing a 75.5% chance of a 25 bps rate cut.
However, this outlook might change when Powell speaks at the Jackson Hole symposium. If he signals a rate cut, expectations will increase. On the other hand, if he maintains caution, rate-cut bets might fall.
AUD/USD key events today
It might be a quiet day for the pair since there won’t be any key reports from the US or Australia.
AUD/USD technical outlook: Bullish trend nears 0.6800 level
On the technical side, the AUD/USD price has broken above the 0.6700 resistance level. The bullish bias is strong as the price has risen far above the 30-SMA. At the same time, the RSI sits in the overbought region, indicating massive bullish momentum.
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After such sharp moves, the price usually pulls back to retest the 30-SMA before bulls regain strength. If this happens, AUD/USD falls below 0.6700 before continuing higher. On the other hand, it might pause above 0.6700 as the SMA catches up. The next target for bulls is at the 0.6800 level.
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Saqib Iqbal
