AUD/USD outlook: Aussie slips despite hawkish RBA ahead of key data

The AUD/USD was unable to benefit from the Reserve Bank of Australia’s 25-basis-point rate hike overnight. The RBA lifted the cash rate to 4.60%, in line with expectations. However, the Australian dollar weakened following the decision, with much of the Bank’s hawkish stance seemingly priced in ahead of the announcement. The US dollar has also remained largely supported following the recent turmoil in the bond markets. The near-term AUD/USD outlook is subject to more volatility with Aussie CPI, US core PCE and jobs data all due for release in the coming days.

 

Before discussing the macro outlook further, let’s quickly turn our attention to the chart of the AUD/USD which is looking quite interesting….

 

Technical AUD/USD forecast: 200-day average, bullish trend and key all level break

 

 

The question now is where the Aussie dollar will close today's session. A break below 0.7000 on a closing basis would be considered a bearish development because that would confirm the break below the 200-day moving average, the bullish trend line, and that psychological level.

 

In that case, we could then see some follow-up technical selling towards the 0.6900 handle in the days ahead, with the potential for the sell-off to accelerate towards the 0.6800 level, where the previous breakout took place back in January.

 

So, there is some downside risk now to the AUD/USD outlook, following what was a strong bullish trend previously. That was until the US dollar fought back against all major currencies.

 

As things stand, the near-term path of least resistance is to the downside. For me to turn tactically bullish again on this currency pair, I'd like to see some technical developments, namely, a quick recovery and a climb back above the 200-day moving average to form a hammer-like candle. That doesn’t have to happen today. And ideally, also, a break above the most recent highs of around 0.7045 would be a clear sign of the bears getting trapped.

 

If we see that, then at that point, things will start to look bullish once again from a technical analysis point of view. In which case, we could then see some follow-up technical buying towards the resistance around 0.7100, with 0.7120 being the next level of resistance.

 

So, the burden of proof is with the bulls now to show up and create bullish-looking price action around current areas. If you don't see that, then the risk is tilted to the downside towards the 0.6900 handle.

 

RBA’s hawkish hike was priced in

 

The RBA’s decision was unanimous, reinforcing its determination to bring inflation sustainably back to target. Its accompanying statement retained a hawkish tone, with the Board reiterating that it would do whatever it considers necessary to contain inflation. Governor Michele Bullock echoed that message, pointing to tight labour market conditions, resilient demand and persistent inflationary pressures as reasons to maintain a restrictive policy stance.

 

Bullock also highlighted renewed tensions in the Middle East as an additional source of inflation uncertainty, while cautioning that the full effects of previous rate increases could take up to 12 months to filter through the economy. The Governor pushed back against suggestions that Australia is facing stagflation, arguing that inflation of around 3.5% and unemployment at 4.6% do not fit that description.

 

Despite the hawkish messaging, the Aussie came under pressure, suggesting investors had already priced in the prospect of further monetary tightening. Attention now turns to the latest Australian inflation figures, due tomorrow, which could influence expectations for the RBA’s next move.

 

The Bank’s latest stance leaves the door open to another rate increase, with a further 25bp hike in the fourth quarter remaining a possibility. However, a sustained decline in oil prices could ease inflationary pressures and allow policymakers to remain on hold.

 

Attention to turn to US data

 

For AUD/USD, the immediate focus will be on the Aussie CPI. But then, the focus will be on US data including the Fed’s favourite inflation measure – the core PCE Price index – on Wednesday, followed by non-farm payrolls report on Friday.

 

Any strength in any of these US macro numbers should keep the US dollar’s bullish trend alive heading into CPI release next week. For now, the greenback remains the key driver in the AUD/USD, with further direction likely to depend on incoming inflation data, interest-rate expectations and broader market sentiment.