.jpg)
- The AUD/USD pair recovered much of its previous losses in Tuesday’s session, following the Reserve Bank of Australia’s decision.
- The US dollar started the week calmly, extending its decline after weak retail sales numbers.
- If the Fed and RBA policies diverge, the Australian dollar could see further gains.
The Australian Dollar (AUD) saw significant gains against the US Dollar (USD) following the Reserve Bank of Australia (RBA) meeting on Tuesday, which concluded with a hawkish tone.
Despite the underlying weakness in the Australian economy, stubbornly high inflation has stimulated the Australian economy RBA To postpone interest rate cuts. On the US side, signs of declining inflation boosted confidence in the Federal Reserve’s interest rate cut in September.
Daily summary of market drivers: Australian dollar rebounds after Reserve Bank of Australia’s hawkish control
- The Reserve Bank of Australia, as widely expected, left interest rates steady at 4.35% and reiterated that “the Board does not rule anything either up or down.”
- Furthermore, Governor Bullock confirmed that the Board has discussed options for a rate hike while not considering a rate cut at this time.
- The firm tone surrounding Australia’s inflation backdrop implies that the threshold for monetary policy easing remains high.
- The Reserve Bank of Australia revealed that “inflation remains above target and is proving to be sustainable” and reiterated that “the Board expects it will take some time before inflation is sustainably within the target range.”
- On the US front, the US Census Bureau released that retail sales, an important measure of household spending, grew at a slower pace than expected in May at 0.1% versus 0.2% expected.
- Slowing retail sales growth may create significant pressure on the US dollar, as it is expected to boost investor confidence in the gradual contraction process.
- The CME FedWatch tool indicates higher odds of interest rates starting to fall from the September meeting, with one or more rate cuts expected in November or December.
Technical Analysis: Bullish signals are gaining momentum, awaiting confirmation
The Relative Strength Index (RSI) has now risen above the 50 level, indicating a shift in momentum. At the same time, the Moving Average Convergence Divergence (MACD) is recording a contraction of the red bars, indicating a decline in selling pressure and a potential reversal.
However, the short-term outlook remains negative unless buyers consolidate above the 20-day simple moving average (SMA) now marked at 0.6640. as Australian Dollar/US Dollar With the 20-day SMA in place, investors should continue to monitor the 0.6560-0.6550 area, where the 100-day and 200-day SMA meet. This support level may be retested in the coming sessions if the bulls fail to confirm their rise.
