Aud Turns Higher On Hawkish Rba

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Aud Turns Higher On Hawkish Rba

Australian Dollar (Aud) Turns Higher On Hawkish Rba

The Australian Dollar (AUD) continues its upward rally against the Greenback for the 2nd day in a row. The recent upside rally in the Australian Dollar (AUD) is driven by the RBA's decision to maintain the OCR around 4.35%.

This marks the 6th time that the RBA has not changed the interest rate despite the weakness in the labor market and the economy in general.

Australian Inflation To Remain High For Now

According to Michele Bullock, there's an ongoing risk related to inflation staying at elevated levels. According to him, it will likely take a long time before inflation can return back to the 2 - 3% range.

In simple words, the RBA governor has made it clear that interest rates will remain at elevated levels for an extended period of time. He also added that the central bank's strategy doesn't align with any near-term rate cut.

However, this doesn't mean that RBA can go ahead and deliver another rate hike. After all, the inflation data from Q2 has put cold water on the forecast for another rate hike.

According to the market players, the first rate cut by the RBA will come in November 2024. Earlier, the market was forecasting a rate cut in April 2025.

Now that the Federal Reserve is expected to start cutting rates a little aggressively from September, we believe that the AUD/USD pair will strengthen further in the short term.

As of now, the AUD/USD pair is trading near 0.6540 with an upward bias as it has already broken out of a descending price channel. This is a sign that the bearish momentum in the AUD/USD pair has diminished, leaving room for the bulls.

On the way down, the most nearest support level is near 0.6490 as it could serve as a cushion if the US Dollar bulls return back with force. Below that, the next support is only a few pips away near 0.6470 which is also a key level.

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