The AUD/USD pair is showing a positive trend, currently trading at 0.6555 with a 0.50% increase on Wednesday. This rise in the Australian Dollar can be attributed to the Reserve Bank of Australia (RBA) decision to keep rates unchanged on Tuesday. Governor Bullock’s statement emphasizing no immediate need for rate cuts has further bolstered the Australian Dollar’s position in the market.
With a mixed economic outlook in Australia and the RBA’s hawkish stance, investors are now only pricing in a 25 bps easing by 2024.
Key Market Updates:
- The RBA chose to maintain rates at 4.35%, stating that “the Board is not ruling anything in or out.” They also highlighted the importance of monitoring upside risks to inflation.
- Updated macro forecasts suggest a prolonged inflation period, with CPI inflation expected to reach the 2-3% band by December 2026. This has led to a market reaction, with only a 25 bps easing priced in by the end of the year.
- Governor Bullock clarified that the Board did consider a rate rise, dismissing the possibility of rate cuts in the near future. She mentioned that expectations for rate cuts are premature.
- In terms of data, China’s July Trade Balance stood at CNY601.98 billion, lower than June’s figures. The rebound in imports by 6.6% YoY and exports by 6.5% YoY in July indicates a positive trend for the Chinese economy, impacting the Australian Dollar due to their significant trade relationship.
Technical Analysis of AUD/USD Pair:
The AUD/USD pair has been bearish recently, but a temporary halt in selling pressure is evident. Immediate support and resistance levels are seen around 0.6480 and 0.6570, respectively.
Indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest a downward trend with diminishing bearish momentum, aligning with the current price action on the chart.
Understanding the Australian Dollar’s Value:
The Australian Dollar’s value is influenced by various factors such as interest rates set by the RBA, commodity prices like Iron Ore, Chinese economic health, inflation rates, and Trade Balance. Market sentiment also plays a crucial role, with risk-on sentiment generally benefiting the AUD.
Investors should closely monitor these factors to make informed decisions regarding the Australian Dollar and its impact on their financial portfolios.
