Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6515.
- Add a stop-loss at 0.6350.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6350.
- Add a stop-loss at 0.6515.
The AUD/USD exchange rate reacted mildly to the latest Reserve Bank of Australia (RBA) interest rate decision. It was trading at 0.6420 on Wednesday morning, down from this month’s high of 0.6515.
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RBA interest rate decision
The AUD/USD exchange rate changed a little after the RBA delivered its second interest rate during the cycle. It lowered rates by 0.25% to 3.85% as most analysts were expecting.
In a statement, Governor Michele Bullock noted that the cut was justified because inflation was moving downwards and that the economy was facing challenges because of Donald Trump’s tariffs.
Analysts expect at least two more rate cuts this year, meaning that the official cash rate will end the year around 3.35%.
Recent data showed that the Australian economy was slowing, with the labor market expected to ease more than expected. Coupled with the dimming global picture, some officials proposed cutting by 0.50%.
The RBA decision came two weeks after the Federal Reserve officials left interest rates unchanged, angering Donald Trump who has called on officials to slash.
Economists agree that the Fed will not cut rates in the next meeting in June. Most of them see it delivering the first cut of the year in its September meeting.
The AUD/USD pair is also reacting to the recent US credit rating downgrade by Moody’s and the ongoing debate on Trump’s “Big, Beautiful, Bill” that will boost the US debt by over $4 trillion in the next decade.
There will be no economic data from the United States and Australia on Wednesday, which may push the pair to continue consolidating.
AUD/USD technical analysis
The daily chart shows that the AUD/USD pair has been in a consolidation phase in the past few weeks. It has formed an ascending channel and is now near its lower side.
The pair has moved above the 50-day Exponential Moving Average (EMA). Also, there are signs that it has formed an inverse head and shoulders pattern, a popular bullish reversal sign.
The AUD/USD pair is also hovering at the 50% Fibonacci Retracement level. Therefore, the pair will likely have a bullish breakout in the coming days, with the initial target being at the year-to-date high of 0.6515. A move above that level will point to more gains to 0.6600. A drop below the 50-day moving average will invalidate the bullish outlook.
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