The USD showed signs of recovery after sticky inflation data from July’s PCE, causing the AUD/USD pair to decline by 0.70% to 0.6750. However, the Reserve Bank of Australia’s (RBA) hawkish stance continues to support the Aussie against further declines.

Despite a complex economic outlook, the RBA’s firm response to inflation has led to market expectations of only a modest 25-basis-point rate cut by 2024.

Key Market Movements: RBA’s Stance and USD Inflation Data Impact AUD/USD Pair

  • RBA maintains OCR at 4.35%, highlighting ongoing inflation concerns.
  • Governor Bullock emphasizes readiness for further rate hikes if necessary.
  • Copper and iron ore price gains contribute to AUD’s upside momentum.
  • US PCE inflation data reveals core inflation rising 2.6%, slower than expected.
  • Divergence between Fed and RBA could limit downside for the AUD/USD pair.

Technical Analysis: Bearish Momentum in AUD/USD Pair

The Relative Strength Index (RSI) indicates increasing selling pressure, while the Moving Average Convergence Divergence (MACD) shows weakening bullish momentum.

Despite recent gains, indicators suggest a potential pullback with key support at 0.6750 and resistance at 0.6800.

Understanding RBA’s Role and Impact on AUD

  • The RBA sets interest rates to maintain price stability and economic prosperity.
  • Higher inflation can attract global investors, strengthening the AUD.
  • Macroeconomic data and RBA policies influence AUD value and market dynamics.
  • Quantitative Easing (QE) and Quantitative Tightening (QT) impact AUD strength.
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