Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6620.
- Add a stop-loss at 0.6410.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6410.
- Add a stop-loss 0.6620.
The AUD/USD pair wavered on Tuesday morning after the Reserve Bank of Australia (RBA) delivered its interest rate decision that met what analysts were expecting. It was trading at 0.6515, a few points above last week’s low of 0.6421.
RBA Cuts Interest Rates
The AUD/USD exchange rate was trading at 0.6515 after the RBA slashed interest rates by 0.25% as most analysts expected. It brought the official cash rate to 3.60%, down from 3.85%, where it had remained in the past few months.
The bank’s rate cut occurred a month after officials surprised market participants by leaving interest rates unchanged at 3.85%. In a statement, officials attributed the cut to the recent economic numbers, which showed that the headline consumer price index (CPI) moved closer to the target of 2.0%.
Officials are also concerned about the Australian economy, which has slowed in the past few months. The most recent results showed that the economy grew by 0.2% in the first quarter and by 1.3% on a YoY basis.
Economists now anticipate more rate cuts this year if inflation continues to trend downwards. Inflation will likely end the year below 2% as energy and commodity prices fall.
The next key catalyst for the AUD/USD exchange rate will be the upcoming US inflation data. Economists expect the data to show that the headline Consumer Price Index (CPI) rose from 2.7% in June to 2.8% in July, while core figure moved to 3.0%.
These numbers will determine whether the Federal Reserve will cut interest rates in the September meeting.
The pair will also react to the latest Fed news as Trump considers the person who will replace Jerome Powell. According to Bloomberg, Secretary Scott Bessent is also considering other officials like Michele Bowman, Lori Logan, and Philip Jefferson. This is in addition to other officials, such as Christopher Waller and Kevin Warsh.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has rebound since April, forming an ascending channel. It has moved above the 50-day Exponential Moving Average (EMA) and is now slightly above the lower side.
The pair is approaching the 61.8% Fibonacci Retracement level at 0.6550, while the Relative Strength Index (RSI) is about to move above the neutral point at 50.
Therefore, the pair will likely continue rising as bulls target the upper side at 0.6620.
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