The AUD/USD pair was consolidating ahead of the RBA decision.
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6635.
- Timeline: 1 day
- Set a sell-stop at 0.6640 and a take-profit at 0.6577.
- Add a stop-loss at 0.6700.
The AUD/USD rocketed higher on Tuesday after the Reserve Bank of Australia (RBA) delivered a surprise rate hike. The Aussie jumped to 0.6672, the highest point since May 19th of this year. In all, the pair has jumped by more than 4% from the lowest level this month.
The RBA delivered a surprise rate hike for the second straight meeting as it showed its resolve to fight inflation. It hiked rates by 0.25% to 4.10% while most analysts were expecting a hawkish pause. It was the 12th rate hike in the past 12 months.
In a statement, the bank said that inflation was still higher than its target level of 2%. It also noted that wage growth was significantly higher than its comfortable levels. A higher wage growth means that people have more spending power, which pushes inflation upwards. In a statement, Governor Philip Lowe said:
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.”
There will be no economic data from the US on Tuesday. The most recent important data from the US showed that the country’s non-farm payrolls (NFP) jumped by 339k in May this year. As such, there is also a possibility that the Fed will also decide to surprise by delivering another 0.25% hike this month.
The AUD/USD pair was consolidating ahead of the RBA decision. It then made a major jump, which saw it rise above the important resistance point at 0.6637, the highest point on June 2nd of this year. This price also coincided with the 50% Fibonacci Retracement level. It was also the upper side of the double-top pattern. Therefore, by moving above that price, the pair invalidated a bearish pattern.
It has moved slightly above the 25-period and 50-period exponential moving averages, which have also made a bullish crossover. The bullish breakout was also supported by higher volume. Therefore, the pair will likely continue rising on Tuesday.
If this happens, the next level to watch will be at the psychological point at 0.670, which is slightly above the 61.8% Fibonacci Retracement level. The stop-loss for this view is at the double-top point at 0.6635.
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