AUD/USD Supported by the RBA’s Rate Hold

  • AUDUSD
    (${instrument.percentChange}%)

AUD/USD Analysis

Fed officials doubled down on their higher-for-longer approach this month, dictated by stubborn inflation, robust labor market and strong economy. They now expect only one cut this year (from three previously) and raised their inflation forecasts for both 2024 and 2025. However, Chair Powell appeared to downplay the upgraded inflation forecasts and the strong payrolls [1], allowing markets to retain a more optimistic pricing for two cuts this year, starting in September.

The Reserve Bank of Australia today maintained rates a 4.35% for fifth straight time [2], but is further away from a cut, compared to its US counterpart. Even more so, it keeps further tightening on the table. During her press conference, Governor Bullock revealed that officials once again considered hiking rates at this meeting and warned that "we need a lot to go our way" in order to bring inflation back to the 2-3% target. [3]

Policymakers are worried about the slowdown of the disinflation process, as monthly data showed two consecutive CPI increases. At the same time, pay growth remains historically high and the minimum wage is set to increase by 3.75% next month. [4]

The Fed's reluctance to cut rates, helps the greenback, putting pressure on AUD/USD this month. This creates risk for further losses that could pierce the daily Ichimoku Cloud, but prolonged weakness does not look easy.

The monetary policy differential is supportive for the Aussie ,since the RBA is not considering lower rates and maintains further hikes in play. On the technical front, AUD/USD defended the pivotal 38.2% Fibonacci of the last leg up and reclaims the EMA200. This provides the impetus for higher highs (0.6714), but we are cautious greater advance that would challenge 0.6839.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 17 Jun 2024 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20240612.htm

2

Retrieved 17 Jun 2024 https://www.rba.gov.au/media-releases/2024/mr-24-12.html

3

Retrieved 17 Jun 2024 https://rba.livecrowdevents.tv/MediaConferenceMonetaryPolicyDecision18June/stream

4

Retrieved 19 Jul 2024 https://www.fwc.gov.au/documents/resources/annual-wage-review-2023-24-decision-announcement.pdf

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