The RBA is, however, expected to slow down on the rate hike trajectory by lifting the benchmark interest rate by 25 basis points to 2.85%, mainly to fight inflation and match the tune with other major central banks. However, the odds of surprising markets with 0.50% interest rate lifts aren’t out of the table and hence the AUD/USD traders are on the edge ahead of the meeting announcements.Westpac anticipates that the RBA Board will lift the cash rate by 50bps to 3.
As per the latest Aussie data, inflation jumped to a multi-year high but the economic fears also grew amid China’s covid woes and global supply crunch. The housing market problem also challenges the RBA hawks and adds strength to the bearish bias surrounding the AUD/USD. That said, a 0.25% rate hike appears already priced in and may offer a knee-jerk reaction, which in turn highlights the pace of bond purchase as the key catalyst. Should the policymakers appear cautious and ease on bond purchases, or surprise the markets by suggesting neutral rates, the bears may concentrate more on the US dollar strength and rush towards the yearly low. On the contrary, an intact bond purchase and hawkish rate statement and/or 0.50% rate hike could tease the AUD/USD bulls.
Technically, AUD/USD rebounds from a 10-DMA support, around 0.6380 at the latest. Also supporting the quote’s recovery are the bullish MACD signals and the steady RSI. However, the upside room appears limited as a descending resistance line from mid-August, close to 0.6490, could challenge the bulls. Following that, the previous week’s peak of 0.6522 and 38.2%retracement level of August-October declines, near 0.6540, will be crucial to cross for the AUD/USD pair buyers to keep the reins.
Alternatively, a downside break of the 10-DMA support near 0.6380 isn’t a sure signal for the bear’s return as a convergence of the 21-DMA and a two-week-long support line, close to 0.6355, will be a tough nut to crack for the AUD/USD sellers before retaking the control.
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