Bearish view
- Set a sell-stop at 0.6500 and a take-profit at 0.6400.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6550 and a take-profit at 0.6650.
- Add a stop-loss at 0.6450.
The AUD/USD exchange rate was flat after the Reserve Bank of Australia (RBA) published its first interest rate decision of the year. It also wavered after another statement by a Fed official, this time, Loretta Mester, the head of Cleveland Fed. It remained intact at 0.6518, a few pips above its lowest point this week.
RBA decision review
The AUD/USD has had several catalysts this week. The most important one was a statement by Jerome Powell, who warned that it was still too early to start thinking of rate cuts since the economy was doing well while inflation was above its 2% target.
Loretta Mester and Raphael Bostic also stressed this issue. In a statement on Tuesday, Mester said that she was confident that the Fed would start cutting rates later this year if the economy evolves as expected. Like Powell, she noted that March was too early to start cutting.
The futures market is now expecting that the first Fed rate cut will come in June this year. According to the Fed Rate Monitor tool, chances of a rate cut in March have dropped to less than 30%. The figure was above 80% a few weeks ago.
Meanwhile, in Australia, the central bank decided to leave interest rates intact at the 16-year high of 4.3%, as was widely expected. In her statement, Governor Michele Bowman noted that the bank was not declaring victory about its inflation fight. She expects that inflation will settle comfortably at the 2% in the next two years.
Analysts now expect that the RBA will start cutting rates later this year because the country’s and China’s economy are slowing. The OECD expects that China’s GDP will grow by 4.7% this year after rising by 5.2% in 2023.
There will be no important economic releases on Wednesday. Instead, the market will focus on the upcoming statement by Fed’s Michele Bowman.
AUD/USD technical analysis
The AUD/USD pair stabilized on Tuesday after the RBA decision. It has retested the important resistance at 0.6526, its lowest swing on January 17th. The pair has moved below the 50-period moving average and the 50% Fibonacci Retracement point.
Further, the two lines of the Percentage Price Oscillator (PPO) are making a bullish crossover while the histogram has moved slightly above the neutral point. Therefore, the short-term outlook for the pair is still bearish, with the initial target being the psychological point at 0.6400. Conversely, the pair could retest the psychological point at 0.6600.
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