Wed, May 22, 2024

AUD/USD Hits 0.6624, Eyes on RBA’s Next Moves

Wibest – Australian Money: Australian dollar (AUD) coins and the Australian flag behind.

Quick Look:

  • AUD/USD resilient, testing key resistance levels; support found at 0.6520.
  • Recent gains are fueled by a weak USD and positive commodity prices.
  • Market focus on upcoming RBA decision, with expectations of maintaining current rates.

The AUD/USD pair has been on an interesting trajectory, closing at a current price of 0.6624. The pair has shown resilience against several key levels. The potential resistance stands at 0.6647, 0.6667, 0.6700, and 0.6871. Meanwhile, crucial support levels are at 0.6520, 0.6465, and 0.6362.

AUD Breaks 0.6600 as USD Weakens, RBA Meeting Looms

The US Dollar weakened on Monday, reflecting an indecisive price action. This allowed the AUD/USD pair to break above the 0.6600 mark. This notable development sets the stage for Tuesday’s Reserve Bank of Australia (RBA) meeting. The market expects the RBA to maintain its official cash rate (OCR) unchanged. The statement indicates that the  (RBA) is generally expected to maintain its OCR without change on Tuesday.

The pair’s advance also coincided with the Federal Open Market Committee (FOMC) decision to keep interest rates unchanged, which saw the Greenback struggling. This, combined with weaker-than-estimated nonfarm payrolls (NFP) in April, further impacted the US Dollar. The lower-than-expected US nonfarm payrolls led to a struggling Greenback, while a solid session in copper prices boosted the Australian Dollar.

Iron Ore Stabilizes Near $120, AUD/USD Outlook Mixed

Iron ore prices have remained near recent peaks, just below $120.00 per tonne, supporting the Australian Dollar. However, upcoming RBA interest rate decisions indicate a 25 basis points rate cut in 2024, with market sentiment suggesting a 90% likelihood of this occurring. The Fed’s tightening monetary policies have also limited gains for AUD/USD, while China’s economic data hasn’t supported a strong Australian Dollar recovery.

RBA Rate Hike Speculations Affect Currencies Movements

The potential for an RBA rate hike has constrained sustained gains in AUD/USD, and the short-term technical outlook for the pair remains bullish. The key resistance levels are at 0.6647 and 0.6667, while support is at 0.6521 and 0.6465. The Relative Strength Index (RSI) has dropped to 66, indicating a potential bearish divergence. The pair is also near the 38.2% Fibonacci retracement level at 0.6641.

The RBA is expected to hold the cash rate at 4.35% during its meeting on Tuesday, while the recent US nonfarm payrolls report revealed several concerning trends. The payrolls eased to 175,000, the unemployment rate rose to 3.9%, and wage growth increased by 0.2%, with all components missing estimates.

AUD/USD’s Future Hinges on RBA’s Economic Strategy

In summary, the AUD/USD pair has experienced an extra advance, with eyes now turning to the RBA’s decision. At the same time, market conditions and recent economic data have provided mixed signals. The pair’s immediate future hinges on key developments, particularly the RBA meeting and future interest rate expectations. The evolving market dynamics highlight the importance of staying vigilant for sentiment and economic indicator shifts, especially in ongoing global economic uncertainties.

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