The pair registered a relief rally after the late-October 2023 lows and comes from its best week of the year. It was boosted by enhanced expectations for peak rates by the Fed after the adoption of a less aggressive stance, the weak employment report and prospects for a hike by the Reserve Bank of Australia.
The RBA delivered indeed its first hike since June on Tuesday, bringing rates to 4.35% and the highest levels in twenty-two years. Officials acted to ensure that inflation would return to the 2-3% target in a reasonable timeframe. In spite of substantial progress, recent monthly data have shown an acceleration and policymakers raised their forecasts. However, the offered softer language than previously around the prospects of future moves, now saying "whether further tightening of monetary policy is required" will depend on the assessment of upcoming data points.
The dovish hike sent AUD/USD lower on Tuesday, faltering once more above the 0.6500 handle and the critical 38.2% Fibonacci of the drop from its summer highs. This creates risk for a return below the EMA200 (black line) and new 2023 lows (0.6269), which would bring 0.6169 in the spotlight.
On the other hand, the central bank did not close the door to more tightening and its US counterpart has also become less aggressive. AUD/USD tries to stay above the EMA200, which allows it to extend its gains and look to the 0.6580 region. However, the Aussie does not inspire much confidence at this stage and the upside is unfriendly.
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.