AUD/USD could rebound if the RBA deliver a hawkish hike
AUD/USD retracted around -4.4% from the June high, and it appears we may have seen a swing low around 66c. The pullback found support around a volume cluster from the previous rally and formed a 3-day bullish reversal pattern (morning star reversal). Soft US inflation helped weigh on the US dollar, and an RBA hike tomorrow could send the Aussie higher.
Money markets are pricing in ~23% chance of a hike, whilst economists are split 50/50 between a hike or a pause.
I suspect money markets have priced it incorrectly once again, and the RBA are more likely to hike by another 25bp tomorrow. 4.1% is still low relative to the RBA’s peers, the BOE hiked by 50bp and the ECB, SNB and BOC all hiked by 25bp since the RBA’s last meeting. And the Fed continue to suggest two more hikes are coming. Sure, Australian inflation was lower than estimate, but remains nearly twice the upper range of the RBA’s target. And as this may be Lowe’s last meeting, he may feel obliged to back another rate hike tomorrow.
AUD/USD has pulled back during Asian trade and is trying to build a base above Thursday's high. An initial move towards the 0.6720 high seems feasible, with a 25bp hike potentially seeing the Aussie extend it rally towards the 86c resistance zone.
Money markets are pricing in ~23% chance of a hike, whilst economists are split 50/50 between a hike or a pause.
I suspect money markets have priced it incorrectly once again, and the RBA are more likely to hike by another 25bp tomorrow. 4.1% is still low relative to the RBA’s peers, the BOE hiked by 50bp and the ECB, SNB and BOC all hiked by 25bp since the RBA’s last meeting. And the Fed continue to suggest two more hikes are coming. Sure, Australian inflation was lower than estimate, but remains nearly twice the upper range of the RBA’s target. And as this may be Lowe’s last meeting, he may feel obliged to back another rate hike tomorrow.
AUD/USD has pulled back during Asian trade and is trying to build a base above Thursday's high. An initial move towards the 0.6720 high seems feasible, with a 25bp hike potentially seeing the Aussie extend it rally towards the 86c resistance zone.
