The Australian Dollar (AUD)/USD:
The Australian Dollar (AUD) faced further losses against the US Dollar (USD) on Monday as markets prepared for Tuesday’s Reserve Bank of Australia (RBA) decision.
Despite some signs of weakness in the Australian economy, persistently high inflation is causing the RBA to delay rate cuts, potentially limiting the AUD’s decline. Investors will be looking for additional clues when the RBA’s meeting concludes on Tuesday, with markets currently pricing in the first rate cut for May 2025.
Daily Digest Market Movers:
– The Australian Dollar continued its sell-off as markets await the RBA’s decision.
– No significant highlights emerged from the Australian economy on Friday.
– The Reserve Bank of Australia is expected to meet on Tuesday and maintain the current rate at 4.35%.
– The RBA is anticipated to adhere to a neutral policy stance, neither committing to nor ruling out future actions.
– Following the May 7 meeting, Governor Bullock mentioned that the board had considered raising rates, a possibility that remains due to persistent inflation.
– Markets fully expect a rate cut at the February meeting.
– Market hopes for rate cuts have consistently clashed with the Fed’s rate cut expectations throughout 2024, with the CME’s FedWatch Tool showing over 60% odds of at least a 25 basis-point rate reduction on September 18.
Technical Analysis:
– Sellers persist as the Aussie nears a key level.
– The Relative Strength Index (RSI) is below 50 and trending downwards, indicating negative momentum.
– The Moving Average Convergence Divergence (MACD) shows steady rising red bars, suggesting continued selling pressure.
The short-term outlook has turned negative as the pair dropped below the 20-day Simple Moving Average (SMA) to around 0.6613, signaling a loss in buying interest. If sellers continue to dominate, the 0.6560-0.6550 range, where the 100 and 200-day SMAs converge, may be retested.
