AUD/USD steady as RBA maintains rates at 4.35%

The Australian dollar has edged higher on Tuesday. In the European session, the Australian dollar is trading at 0.6845, up 0.12% on the day. Earlier today, AUD/USD climbed as high as 0.6869, its highest level this year.

The Reserve Bank of Australia maintained the cash rate at 4.35% in a widely expected decision. This was the seventh consecutive time that the central bank has held rates, which are at a 12-year high. The Australian dollar is showing little movement in response to the rate announcement.

RBA says inflation still too high

The RBA statement acknowledged that inflation has fallen substantially but was “above target and proving persistent” and that the central bank’s highest priority remains bringing inflation back down to the target range of 2%-3%. RBA members voiced concern about the uncertain economic conditions, noting that GDP was soft in the second quarter and the slowdown in China has hurt commodity prices.

Governor Bullock reiterated in her press conference after the meeting that the RBA is unlikely to lower interest rates in the “near term”. In August, she explained that “near term” meant for six months, which means that the RBA doesn’t expect to trim rates before early 2025.

Bullock said that the RBA did not consider hiking rates at today’s meeting which was perhaps a slightly dovish shift. In previous meetings, the RBA discussed raising hikes, saying that inflation was not falling as fast as expected.

In an odd twist, the August inflation report will be released tomorrow. Headline inflation is expected to ease to 3%, compared to 2.8% in July. If inflation does fall as expected or lower, it will support for the case for the RBA to lower rates at the next meeting in November.

AUD/USD technical

• AUD/USD tested resistance at 0.6865 earlier. This line had held in resistance since December 2023. Close by, there is resistance at 0.6886.

• 0.6830 and 0.6806 are the next support levels.