- The AUD/USD outlook suggests a dovish stance by the Reserve Bank of Australia.
- Market participants are pricing a 60% chance of another rate cut in July.
- Traders await a vote in the US on Trump’s tax cuts.
The AUD/USD outlook suggests a dovish stance by the Reserve Bank of Australia that could mean more rate cuts in the coming months and a weaker Aussie. At the same time, market participants are on edge ahead of a vote on Trump’s tax cuts.
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The Reserve Bank of Australia lowered borrowing costs by 25-bps on Tuesday and assumed a more dovish tone. At the previous meeting, policymakers had cut rates but maintained caution. However, this time, they noted the economic uncertainty brought about by Trump’s tariffs. At the same time, inflation in Australia has cooled. Therefore, nothing is holding the RBA back. Market participants moved to price a 60% chance of another rate cut in July.
On the other hand, the dollar paused its previous session decline. However, it drifted on Tuesday as market participants awaited a vote in the US on Trump’s tax cuts. The dollar had collapsed in the previous session after Moody’s downgraded the US government’s credit rating.
Elsewhere, Fed policymakers remain cautious about rate cuts, waiting for more clues on the impact of Trump’s tariffs. This week, traders will focus on business activity data that will show the state of the economy. Downbeat numbers could pile pressure on the Fed to cut interest rates.
AUD/USD key events today
After the RBA meeting, market participants do not expect any key releases from Australia or the US.
AUD/USD technical outlook: Choppy price action
On the technical side, the AUD/USD price trades in a range between the 0.6375 support and the 0.6500 resistance. Within this range, the price has been chopping through the 30-SMA with no clear direction. At the same time, the RSI has chopped through 50, indicating almost equal momentum for bulls and bears.
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At the moment, the price trades below the SMA with the RSI under 50, a sign that bears might soon retest the channel support. A break below the support would signal a bearish sentiment shift, likely starting a new downtrend. It would also allow AUD/USD to retest the 0.6250 support level.
However, if the range support holds firm, bulls will resurface to challenge the range resistance, and the consolidation might continue.
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Saqib Iqbal
