AUD/USD After RBA Meeting

Policy rate as expected by RBA was raised by 50 bps to 1.85% last Tuesday. This is the fourth consecutive hike and steepest in almost 30 years. This helped a little to raise AUD/USD, which was down by almost 1% from the beginning of this week. This release leaves the pair to trade below psychological level of 0.70. The recent tensions between China and Taiwan have added to weaker AUD, but some of the factors have been primary driver behind this latest move.

Latest guidance from the RBA that near-term future hikes may not be standing as the one this week was likely the bug factor behind the fall of AUD/USD. RBA also admits that it is trying hard to slow down the inflation, which hit 6.1% in second quarter without any big impact on Australian economy. A cadre of Fed speakers this week haven’t given any indication that Fed is looking to ease up on raising interest rates. Currently, the RBA, like many other major central banks, doesn’t appear capable of keeping pace with the Fed in terms of policy tightening.

AUD/USD is trading below the 200-day exponential moving average, indicating the pair is more biased toward a downtrend. A case can be made about the 3rd June swing of 0.72830 marks the last corrective move before the prior to the last impulsive swing low of 0.66816. If so, Tuesday’s substantial decline may very well represent a rejection of the intervening 50% Fibonacci resistance level of 0.68923. If it happens, that could portend any further fall of AUD/NZD.