RBA’s less dovish-than-expected decision supported the Aussie earlier today!
As expected, the Reserve Bank of Australia (RBA) decided to keep its interest rates at 4.35% in February.
The central bank also acknowledged that inflation has eased, but was still uncertain about the pace of its return to RBA’s 2% – 3% target range.
AUD/USD 4-hour Forex Chart by TradingView
What caught traders’ attention was that Governor Bullock and her team didn’t drop the prospect of future interest rate hikes, saying that “further increase in interest rates cannot be ruled out.” If you recall, central banks like the Fed and the Bank of England (BOE) have joined the doves’ side with their interest rate cut biases.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the Australian and the U.S. dollars, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
How high can AUD/USD fly before the bears step back in?
AUD/USD found support from the S1 (.6470) Pivot Point line and it looks ready to retest the .6550 psychological handle. As you can see, the area also lines up with a previous support, the Pivot Point (.6550) area, and a trend line resistance that hasn’t been broken since the start of the year.
A rejection around the previous inflection point could draw in AUD/USD sellers and up the odds of the pair dropping back to its intraweek lows. Australia won’t be printing any more economic reports today but market themes or headlines that may increase USD demand could put new weekly lows on the table for AUD/USD.
Of course, we’re not ruling out the possibility of AUD extending its upswing against USD.
If AUD bulls sustain their momentum, or if the next trading sessions‘ headlines favor risk-taking, then AUD/USD may get enough push to retest (and maybe even break) the trend line resistance that we’re eyeing.
The .6600 – .6650 area may attract profit-takers if we do see sustained AUD/USD demand in the next couple of days.
What do you think? Which way will AUD/USD go?