AUD/USD Forecast: Upside limited after being unable to hold above 0.6700
AUD/USD Current Price: 0.6664
- RBA unexpectedly hikes rates by 25 basis points, focus shifts to the Fed.
- Aussie outperforms after RBA surprise but lags during the American session.
- AUD/USD shows mixed signs after retreating in American hours.
On Tuesday, the AUD/USD pair climbed higher due to the Reserve Bank of Australia's (RBA) unexpected decision. However, as market sentiment worsened during the American session, the pair fell back from its weekly high below 0.6700.
The RBA increased the key interest rate by 25 basis points to 3.85%, surprising market participants who had expected no change. This move caused the Aussie to surge, with AUD/USD hitting its highest level since April 21 at 0.6716. RBA's statement suggested that rates could continue to rise, and Governor Philip Lowe said they would do what is necessary to bring inflation back to target. Friday's Statement on Monetary Policy will offer more clues about the future.
However, despite the decline in US yields, the AUD/USD pair pulled back later as the Greenback regained momentum amid risk aversion. The Aussie lagged during the American session, and AUD/NZD, which had surged to 1.0830, dropped back to 1.0735, the level it had before the RBA decision.
On Wednesday, Australia will report its March Retail Sales with a 0.2% expected gain and the AiG Manufacturing for March and the S&P Global Services PMI for April. Additionally, the New Zealand Q1 Employment report will be relevant. In the US, the focus will be on the Federal Reserve's decision. The ADP private payroll numbers and the S&P Global Services PMI are also due.
Considering the relevance of the economic reports ahead, the FOMC decision, the RBA statement, and NFP, markets will likely remain busy, setting the stage for high volatility.
AUD/USD short-term technical outlook
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The failure of AUD/USD to hold above 0.6700 suggests that the pair still needs to be ready for a major rally. However, it did improve the outlook in the short term after breaking above the 0.6645/50 area, which has now become immediate support. Technical indicators are currently favoring a bullish stance but without much conviction. If AUD/USD manages to reclaim 0.6700, it will strengthen the outlook for the bulls, opening the doors to 0.6750.
The daily chart shows the situation is less favorable for the bulls as the price failed to hold above the 20-period Simple Moving Average (SMA) at 0.6680. The price is below key SMAs, and technical indicators are moving around midlines with a slight upward slope.
Support levels: 0.6645 0.6620 0.6580
Resistance levels: 0.6680 0.6705 0.6740
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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.
