Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6595.
- Add a stop-loss at 0.6700.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6665 and a take-profit at 0.6750.
- Add a stop-loss at 0.6600.
The Australian dollar retreated after the Reserve Bank of Australia (RBA) delivered its July interest rate decision. The AUD/USD pair retreated to a low of 0.6650, which was lower than Monday’s high of 0.6690.
RBA leaves rates unchanged
The biggest AUD/USD news on Tuesday was the latest interest rate decision by the RBA. In it, the bank decided to leave interest rates unchanged at 4.10%. Most analysts were expecting the bank to hike interest rates by 0.25% for the second straight month.
In a statement, Governor Philip Lowe said that while inflation has peaked, it still remains above the 2% target. The rate pause will give the bank an opportunity to assess the impact of the most recent rate hikes. As a result, the bank will resume the rate hikes if inflation remains stubbornly high. The statement added:
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.”
The RBA noted that the Australian economy is doing well. House prices have started drifting upwards while many Australians have savings buffers.
Looking ahead, the next important mover for the AUD/USD pair will be from the United States, where the BLS will publish the latest jobs numbers on Friday. Economists believe that these numbers will show that the American economy added over 225k jobs in June while the unemployment rate remained intact at 3.7%.
Regardless of the report, analysts believe that the Fed will hike interest rates by another 0.25% this month. It will also point to more increases in the coming months.
The AUD/USD market action will be muted on Tuesday since US markets will be closed for Independence Day celebrations.
AUD/USD technical analysis
The two-hour chart shows that the AUD to USD price has been drifting upwards after falling to a low of 0.6595 last week. It has formed an ascending channel shown in orange. The pair is consolidating at the 25-period and 50-period moving averages. It has also moved slightly below the 50% Fibonacci Retracement level.
Therefore, the outlook for the pair is bearish since the Fed is expected to maintain its hawkish tone later this month. If this happens, the next level to watch will be at 0.6595, the lowest point last week.
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