AUD/USD Forecast: Aussie likely to test 0.6700 after hawkish RBA meeting
AUD/USD Current Price: 0.6672
- The RBA raised rates again, defying market consensus and sending the Aussie higher.
- Australia is set to release its GDP data on Wednesday.
- The AUD/USD pair surged and tested the 200-day Simple Moving Average.
The AUD/USD rose for the fourth consecutive day and appears poised to continue its upward trend. On Tuesday, the Reserve Bank of Australia (RBA) rate hike boosted the Aussie. Gains were limited during the American session due to risk aversion that supported the US dollar. The pair peaked at 0.6684, the highest level since May 16.
The RBA raised its key interest rate by 25 basis points to 4.1%, repeating its decision from the May meeting. This marks the second consecutive time the RBA exceeded economists' expectations. The central bank remains concerned about inflation, as the Consumer Price Index for April came in at 6.8%, well above the 2-3% target range. The RBA statement suggests that further tightening of monetary policy may be required.
Australian bond yields rose after the decision, as did the Australian Dollar. The AUD/USD pulled back briefly during the European session but then resumed upward movement. The hawkish stance of the RBA is offsetting weak economic data from China and is also benefiting from a weaker US Dollar.
In other news, Australia reported a current account surplus of AUD 12.3 billion in the first quarter, slightly below expectations. Reports also indicated that China had asked large banks to cut deposit rates to boost the economy. On Wednesday, Australia is scheduled to release its Q1 GDP data, which is expected to show a positive growth rate of 2.7% YoY. This is an improvement from the previous quarter's growth rate of 2.4%.
AUD/USD short-term technical outlook
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The AUD/USD pair is trading almost 200 pips higher than its level a week ago after rising for four consecutive days. Technical indicators on the daily chart are not showing overbought readings, suggesting that further gains over the next sessions are likely. The pair is back above the 20-day Simple Moving Average (SMA) at 0.6610 but is slightly below the 200-SMA, which stands at 0.6690.
On the 4-hour chart, the bias is to the upside in the short term. The Relative Strength Index (RSI) is overbought; the Momentum is slightly pulling back. These suggest that profit-taking or consolidation could take place. However, a break above 0.6675 would clear the way for more gains, with attention turning to the 0.6700/05 area. Risks are tilted to the upside above the 0.6610/20 area (horizontal support and 20-SMA).
Support levels: 0.6640 0.6610 0.6580
Resistance levels: 0.6680 0.6710 0.6745
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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.
