Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6535.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6700.
The Australian dollar moved sideways after the country’s central bank delivered a relatively hawkish decision on Tuesday morning. The AUD/USD pair was trading at 0.6610 after the central bank left rates unchanged.
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RBA rate decision
The AUD/USD pair wavered after the central bank decision. Governor Michele Bullock and her team left interest rates unchanged at 4.35% for the fifth straight meeting. Rates stand at the highest point in 12 years.
In her statement, she maintained that Australia’s inflation has remained stubbornly high. She insisted that she will only cut rates when she is confident that it is heading towards the 25 target level.
Recent data showed that the country’s inflation has remained much higher than the 2% target. It rose to 3.5% in April and is expected to remain higher for longer because of the rising housing and services costs.
The RBA hinted that it could raise rates if inflation remains stubbornly higher for longer. However, most analysts believe that the next option will be a cut, possibly in the fourth quarter of first quarter of 2025. Besides, recent data showed that the labor market was still strong, with the unemployment rate dipping to 4%.
The RBA decision came a few days after the Federal Reserve left rates unchanged and hinted that it will deliver just one cut this year. A few months ago, the Fed was hinting that it would cut interest rates over 3 times this year.
Looking ahead, the next important economic data to watch will be the US retail sales, industrial production, and manufacturing data. Economists expect these numbers to show an improvement, with retail sales expected to improve to 0.3%.
While these numbers are important, their impact on the Federal Reserve will be limited. Judging by last week’s statement, the Fed is focused on lowering inflation while preventing a hard landing.
AUD/USD Technical Analysis
The AUD/USD exchange rate has been in a tight range in the past few days. On the daily chart, it has moved slightly below the Woodie pivot point. It has also remained slightly above the 50-day Exponential Moving Average (EMA).
At the same time, the Relative Strength Index (RSI) has dropped below the 50 level while the two lines of the Klinger Oscillator have formed a bearish crossover. Therefore, the pair will likely remain in this range on Tuesday. More upside could see it rise to the psychological level at 0.6700 while a break below 0.6600 will point to more downside.
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