The AUD/USD pair has climbed to around the 0.7190 mark, gaining some upward momentum following a recent interest rate hike by the Reserve Bank of Australia (RBA). Market attention is now shifting to what this means for future policy directions.
The RBA raised the cash rate by 25 basis points to 4.35%, marking the third consecutive increase this year in an effort to tackle inflation. This decision came through a strong 8-1 vote, which reflects a greater consensus among policymakers compared to more divided opinions in the past.
That said, the RBA’s communication was fairly measured, which somewhat muted the Australian dollar’s reaction. Officials noted that inflation is likely to stay above target, driven by high energy costs and geopolitical issues. They indicated a more data-dependent approach going forward, suggesting that a pause in rate hikes could be on the table to review incoming information.
On the US front, the latest data presents a mixed yet somewhat supportive picture for the US dollar (USD). Job openings have dipped slightly from 6.922 million to 6.866 million in the JOLTS report, hinting that while the labor market is still tight, demand for labor is gradually easing.
In addition, the ISM Services Purchasing Managers’ Index (PMI) registered at 53.6, a slight decrease from 54.0 previously, but still comfortably within the expansion range. Key fundamentals such as business activity and new orders continue to show strength. Overall, this data suggests a muted slowdown in the labor market alongside robust activity in services, which bolsters the notion that the Federal Reserve can maintain a tight policy stance despite the positive US economic indicators. The US dollar seems to be losing some ground as risk sentiment improves.
Short-term technical analysis:
Looking at the 4-hour chart, AUD/USD is trading at 0.7194, sitting above the 20-period simple moving average (SMA) of 0.7185 as well as the 100-period SMA of 0.7157, indicating a generally positive short-term outlook. A cluster of supportive averages suggests a favorable environment, and the Relative Strength Index (14) hovering around 56 points to steady, though not excessive, bullish momentum as prices near a high.
In terms of resistance, the immediate level is at 0.7195, where further upward movement is currently hindered. On the lower end, initial support can be found at the 20-period SMA around 0.7185, followed by the horizontal bottoms at 0.7174 and 0.7167. Stronger support could emerge at the 100-period SMA near 0.7157 and the previous horizontal level at 0.7152.
