Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6870.
Add a stop-loss at 0.7200.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.6870.
The AUD/USD exchange rate wavered after the Reserve Bank of Australia (RBA) delivered its interest rate decision. It dropped to 0.7052, a few pips below Monday’s high of 0.7076. It remains much higher than last month’s low of 0.686 as focus shifts to the upcoming US consumer inflation report
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RBA Interest Rate Decision
The AUD/USD pair wavered after the RBA decided to leave interest rates unchanged. As it was widely expected, the bank decided to leave interest rates unchanged at 4.35%, with officials noting that the impact of the US-Iran war in the Middle East being weaker than expected.
At the same time, officials noted that consumer spending growth was slowing, while growth in business debt was strong. Also, momentum in the housing sector has shifted, with house prices falling modestly. Top analysts caution that house prices may fall further soon.
Therefore, there are signs that the bank has turned a bit dovish, with officials noting that the economic growth would be slower than expected this year. As such, all the big four banks predict that the next move by the RBA will be lower. Australia will next publish the latest wage price index data on Wednesday.
The next important AUD/USD news will be the latest US consumer inflation report. Economists expect the upcoming report to show that annual inflation dropped from 3.5% in June to 3.4% in July. Core inflation, which excludes the volatile food and energy prices, is expected to come in at 2.5% from June’s 2.6%.
US inflation will likely remain above the 2% target because of the ongoing quagmire in the Middle East. Oil prices have continued rising, with Brent and the West Texas Intermediate (WTI) remaining above $80.
AUD/USD Technical Analysis
The daily chart reveals that the AUD/USD pair pulled back to 0.7045, a few points below last week’s high of 0.7075. It retested the upper side of the ascending channel, which is part of the bearish flag pattern.
The pair remains slightly above the 25-day moving average and 23.6% Fibonacci Retracement level. At the same time, the Relative Strength Index (RSI) has dropped to 56. Therefore, the pair may have a bearish breakout, potentially to the key support level of 0.6865, its lowest point in July.
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