Nov 1, 2022
VOT Research Desk
The Reserve Bank of Australia announces its interest rate decision. It is advantageous, or bullish, for the AUD if the RBA raises interest rates and expresses concern about the economy’s potential for inflation.
Similar to this, it is considered negative or bearish if the RBA maintains the current interest rate or lowers it while holding a dovish view of the Australian economy.
Following six consecutive rate hikes in the previous meetings, the Reserve Bank of Australia (RBA) is expected to announce another hawkish monetary policy outcome during the planned Interest Rate Decision on Tuesday at 03:30 AM GMT.
The RBA is projected to pause its rate hike trajectory by raising the benchmark interest rate by 25 basis points (bps) to 2.85%, mostly to combat inflation and keep pace with other major central banks.
However, the possibility of shocking markets with 0.50% interest rate hikes is not out of the question, therefore AUD/USD traders are on edge ahead of the meeting news.
Bears retain their pressure ahead of the RBA’s decision.
The AUD/USD picks up bids to reprise its intraday high around 0.6420 amid the market’s cautious optimism on Tuesday morning. The recent recovery in the quotation is also influenced by a stronger China’s Caixin Manufacturing PMI for October, which rose to 49.2 from 49.0 projected and 48.1 previously.
The talk that the RBA will opt for additional rate hikes in the future, even if the magnitude of the lift may weaken, is also keeping purchasers upbeat.
According to the most recent Australian data, inflation has risen to a multi-year high, but economic concerns have grown as a result of China’s commodity troubles and a worldwide supply shortage.
The property market issue also poses a challenge to RBA hawks and strengthens the bearish bias surrounding the AUD/USD. However, a 0.25% rate hike looks to be priced in and may cause a knee-jerk reaction, highlighting the speed of bond purchases as the primary stimulus.
If authorities appear cautious and ease asset purchases, or if they surprise markets by indicating neutral rates, bears may focus more on US dollar strength and rush to the yearly low. On the other hand, a complete bond purchase, hawkish rate statement, and/or 0.50% rate hike could entice AUD/USD bulls.
AUD/USD Technical Analysis
Technically, the AUD/USD is rebounding from a 10-DMA support level, which is now at 0.6380.
The bullish MACD indications and the stable RSI are also helping the quote’s recovery.
However, the bulls’ upside potential appears to be limited as a declining resistance line from mid-August, near to 0.6490, could pose a challenge. Following that, the previous week’s peak of 0.6522 and the 38.2% Fibonacci retracement level of the August-October falls, near 0.6540, will be critical to cross for AUD/USD buyers to maintain control.
A negative break of the 10-DMA support near 0.6380, on the other hand, isn’t a sure indicator of the bear’s comeback, 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 regaining control.
