In case you missed it, the RBA raised its cash rate by 25 bps to 4.85% today in a less straightforward 6-3 vote. That takes the cash rate to the highest level in 18 years, with the central bank trying not to pre-commit to further tightening at this stage. So far, Bullock’s tone in her press conference has been more neutral and even in the latest remarks here.
She says that the rate hike today might not be the last one but in trying to make that judgment, “it is not as obvious” as compared to before. Adding that she doesn’t know how high rates will need to go and that it is up to the market to interpret their messaging.
Bullock continues to reaffirm that the central bank will stay on a data-dependent path in saying that “it is probably good to wait now and assess incoming data”.
Having said that, she continues to at least highlight that inflation remains a key concern heading into next year. But at least for now, the dissenting votes should tone down any overly hawkish expectations from the central bank for the immediate outlook.
As mentioned here , markets were not pricing in strong odds of another rate hike to follow up the one today. And so, the RBA is reaffirming those expectations for the most part with their choice of language and communique this week.
AUD/USD is down 0.3% on the day to 0.6975 currently, with the technicals also emphasising a rejection at the 100 and 200-day moving averages amid a fall back below 0.7000 today:
The drop now puts into focus the swing region support around 0.6900-15 next with the trendline support from the April to June lows also holding thereabouts. So, that will be the first immediate downside risk level before the June lows come into play around 0.6865-75 next.
As for buyers, the onus is on them to try and arrest the decline to get back above 0.7000 first. But even then, there will be stubborn resistance from the 100-day (red line) and 200-day (blue line) moving averages around 0.7030-56 to get through.
With the RBA now out of the way, the focus for AUD/USD now turns to the US midterm elections instead. That will potentially be the next key trigger for a notable move in the dollar, with traders watching how Republicans are going to fare in defending both chambers in Congress from falling to Democratic control.
This article was written by Justin Low at investinglive.com.
