The Australian dollar has staged a mild recovery against the US dollar this morning after the Reserve Bank of Australia kept interest rates at 3.60 percent, which broke the cycle of its recent hiking path.
According to the policy statement the RBA does leave the door open for further tightening in the months ahead but the language on that also suggests that even if it does come, perhaps there might just be one more rate hike only.
The language change is that they now emphasise that there is only “some further tightening” that may well be needed instead of previously saying that “further tightening” will be needed. It’s subtle but it is a change.
On the banking crisis the RBA said “The Australian banking system is strong, well capitalised and highly liquid. It is well placed to provide the credit that the economy needs.”
On inflation the RBA said “The central forecast is for inflation to decline this year and next, to around 3 per cent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case.”
Going forward, the main driver for the AUDUSD pair will be the US dollar as we see the NFP released this week and also whether the US dollar index will continued to depreciate this month.
According to the ActivTrader market sentiment tool some 48 percent of traders are bullish towards the AUDUSD pair. As we typically look to fade sentiment biases, this could mean the AUDUSD pair could continue to move sideways.
It is worth mentioning that high levels of neutral sentiment suggest a classic contrarian sideways trading, so do be careful buying this pair at current level, especially as we trade around current levels.
AUDUSD Short-Term Technical Analysis
The four-hour time frame a shows that a large rising price channel type pattern has formed. We may see the AUDUSD pair forming a much larger reversal pattern if we see failure towards the 0.6800 area.
Based upon its overall size, and of the pattern is correct then a move back to the 0.6700 region seems plausible. If a strong breakout takes hold expect further heavy upside in the days to come.
AUDUSD Medium-Term Technical Analysis
The daily time frame shows that a large head and shoulders. These types of patterns are typically considered to be one of the most reliable bearish reversal patterns.
According to technical analysis we could see a much more steeper price drop if we see the AUDUSD pair not passing 0.6800, which is neckline resistance. A potential selling opportunity could be coming if the pattern is correct.
