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The Australian Dollar has turned sharply lower on Tuesday following the latest RBA meeting overnight. The bank was seen keeping its headline policy rate on hold at 4.10%, despite some speculation that it might opt for a further increase. The RBA noted that “Recent data are consistent with inflation returning to target range over the forecast horizon”. Additionally, the bank went on to say that “Timely indicators on inflation suggest that goods price inflation has eased further, but the prices of many services are continuing to rise briskly”, as the bank’s “Central forecast is for CPI inflation to continue to decline and to be back within the 2–3 percent target range in late 202.5”.
 

Market Reaction

Despite this central view, the RBA did note that there are significant uncertainties in the outlook and acknowledged that further tightening might still be needed. On the back of this latest pause, and with inflation declining steadily, the market is now repricing its rates outlook for the RBA, reflected in a lower AUD price. AUDUSD in particular is vulnerable given the hawkish shift in Fed expectations following the Fed’s recent tightening signal.
 

Technical Views

AUDUSD

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The recent failure at the .6520 level has seen the market turning heavily lower. Price is on course to test the .6275 level support next and with momentum studies bearish, risks remain pointed firmly lower. Only a break back above the .6520 level will negate the near-term bearish view. 

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