AUD/USD Jumps After Surprise RBA Hike, Focus Now Shifts to the US Fed

  • AUDUSD
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AUD/USD Analysis

The Reserve Bank of Australia had paused its rate-hike cycle in April and although it had kept the door open to more moves, markets were expecting officials to stay on the sidelines again today, as last week's data showed a significant moderation in inflationary pressures in Q1.

Policymakers welcomed the decline and even though it "has passed its peak", they view inflation as "still too high". Given the importance of returning it back to the 2-3% target, they decided today to hike rates by 25 basis points, surprising markets. More to it, they kept more increases on the table, warning that "some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe". [1]

Focus now shifts to the US Federal Reserve, which announces its monetary policy decision on Wednesday. Its latest projections from March, imply another 25 bps rise before pausing [2]. Inflation is elevated despite the cooling down of headline figures, which calls for sustained restrictive stance.

On the other hand, the recent developments around First Republic show that there is still stress in the system, which may force a more conservative approach. The regional institution disclosed massive deposit outflows last week and ended up being sold to JPMorgan Chase on Monday. [3]

AUD/USD rallies today due to the surprise rate increase by the RBA and tests the EMA200 (black line), trying to step into the daily Ichimokou Cloud. This brings the 38.2% Fibonacci of the 2023 high/low drop (0.6790-0.6806) in its corsairs, but new catalyst will be required for taking out.

Despite today's surge, the upside looks unfriendly and the Aussie has repeatedly rejected the aforementioned Fibonacci, which creates risk for new 2023 lows (0.6563). Below the EMA200 bias is on the downside and In any case, the next leg of the move will be determined by the Fed outcome.

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 02 May 2023 https://www.rba.gov.au/media-releases/2023/mr-23-10.html

2

Retrieved 02 May 2023 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf

3

Retrieved 24 Jun 2024 https://www.jpmorganchase.com/ir/news/2023/jpmc-acquires-substantial-majority-of-assets-and-assumes-certain-liabilities-of-first-republic-bank

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