AUD/USD Forecast: A small correction before the RBA

Matías Salord FXStreet

AUD/USD Current Price: 0.6494

RBA is expected to raise interest rates on Tuesday.
A no-hike from the RBA could weigh on the Aussie.
The AUD/USD is correcting lower, after testing the 100-day SMA.

The AUD/USD reached the highest intraday level in two months on Monday at 0.6522 and then pulled back, falling slightly below 0.6500. The short-term bias remains to the upside, but the bearish correction could extend further.

The key event ahead for the Australian Dollar (AUD) is the Reserve Bank of Australia (RBA) meeting on Tuesday. Following the latest inflation data, particularly the core inflation rate and retail sales data, the market sees it likely that the central bank will raise its key rate by 25 basis points from 4.10% to 4.35%. It would be the first hike after pausing during four consecutive meetings.

The US Dollar bottomed during the European session and gained momentum amid a rebound in US Treasury yields. However, the bearish tone set last week still looks dominant. After the Federal Reserve (Fed) meeting and the latest employment data, the Greenback doesn't appear as strong as it used to be, but the US economy remains robust, which could limit the decline of the Dollar.

It will be a quiet week regarding US data, with no top-tier data due on Tuesday. The release of the Chinese trade data during the Asian session before the RBA decision, could weigh on market sentiment.

AUD/USD short-term technical outlook

On the daily chart, the AUD/USD pair is currently testing the 100-day Simple Moving Average (SMA) at 0.6510. A consolidation above this level would open the doors to further gains. The next crucial SMA to watch is the 200-day at 0.6615. The indicators in the daily chart point to the upside.

In the 4-hour chart, the pair is correcting lower. Technical indicators suggest that the downward move could extend into the Asian session. The Relative Strength Index (RSI) has turned south and dropped below 70, indicating a bearish momentum. The MACD is also showing negative signs. However, it's important to note this indicator is at an extreme level, which could suggest a correction rather than the start of a significant decline. The Aussie would need to hold above 0.6470 to keep the door open for fresh highs.

Support levels: 0.6380 0.6445 0.6410

Resistance levels: 0.6530 0.6545 0.6565

View Live Chart for the AUD/USD

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Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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