The Federal Reserve, on the other hand, is expected to maintain a hawkish tone in the next few meetings now that the banking crisis has eased.
- Set a buy-stop at 0.6782 and a take-profit at 0.6850.
- Add a stop-loss at 0.6650.
- Timeline: 1-2 days.
- Set a buy-stop at 0.6690 and a take-profit at 0.6580.
- Add a stop-loss at 0.6750.
The AUD/USD pair pulled back after the Reserve Bank of Australia (RBA) decided to pause its interest rate hikes. The exchange rate dropped to a low of 0.6720, which was a few points below this week’s high of 0.6795.
The AUD/USD pair dropped slightly after signs of a divergence between the Federal Reserve and the RBA emerged. On Tuesday, the RBA decided to leave interest rates unchanged at 3.60%. This decision was in line with what most analysts were expecting. It was also the first time that the bank left interest rates unchanged since May last year.
In a statement, the RBA said that the pause was necessary since it will allow it to assess the impact of the recent rate hikes. That’s important because the impact of monetary policy on the economy tends to lag for a few months. Also, the bank warned that the economy was slowing because of high inflation and higher interest rates.
The Federal Reserve, on the other hand, is expected to maintain a hawkish tone in the next few meetings now that the banking crisis has eased. Jerome Powell, the Fed Chair has warned that more rate hikes will be needed since inflation remains at an elevated level.
The main mover of the AUD/USD pair is a statement by Governor Philip Lowe and the upcoming US private payroll numbers. In his first statement after the RBA decision, Lowe said that the rate hike pause was necessary and that the bank will consider more hikes if inflation remains stubbornly high.
ADP will publish the latest private payroll numbers. Economists expect the data to show that the private sector created 200k jobs in March after adding 242k in the previous month. US jobs data will be important since the Fed has committed to be data-dependent.
The AUD/USD pair has formed an ascending regression trend on the 4H chart. It dropped and moved to the middle line of this channel and there are signs that it is struggling to cross it. The pair is also trading at the 25-period and 50-period moving averages. At the same time, the MACD and the Relative Strength Index (RSI) are pointing downwards.
Therefore, the pair will likely bounce back on Wednesday. More gains will see the pair continue rising as buyers target the next psychological level at 0.6900. This view will be confirmed if it manages to move above 0.6787.