Australian Dollar Forecast: Will AUD/USD Gains Continue After RBA Decision?

10 and 20 us dollar bill

AUSTRALIAN DOLLAR, AUD/USD, RESERVE BANK OF AUSTRALIA -TALKING POINTS

  • Wall Street advances but technology lags, APAC equities may follow suit
  • RBA decision may cause some Australian Dollar volatility in Tuesday’s session
  • AUD/USD shifts higher after moving averages converge to offer support

TUESDAY’S ASIA-PACIFIC OUTLOOK

Asia-Pacific markets may see a more optimistic tone across major equity indexes following a generally upbeat Wall Street performance to start the week. The Dow Jones Industrial Average (DJIA) gained 0.70%. Traders dove into industrial and healthcare names but moved away from technology stocks, with the NDX 100 index declining 0.44%.

The US Dollar is on the move lower after a manufacturing PMI release from the Institute of Supply Management (ISM) missed the consensus forecast. Greenback weakness is helping to lift precious metals. Gold and silver prices recorded healthy gains, increasing over 1% and 3.5%, respectively. Besides the weaker USD, falling Treasury yields are also likely driving prices higher, with the 10-year yield down just over 2% overnight.

Elsewhere, the risk-sensitive Australian Dollar is up against the US Dollar, reflecting not only broader weakness in the Greenback but also strengthening sentiment in markets. AUD/USD will be in focus today as the May Reserve Bank of Australia (RBA) meeting interest rate decision crosses the wires. According to the DailyFX Economic Calendar, the Australian central bank is set to hold its benchmark rate steady at 0.10%.

The RBA is unlikely to change the message it has conveyed this year, which is to hold rates steady until persistent inflation is seen, along with a stronger labor market. Still, some expect a change to the target bond for its yield curve control from the April 2024 bond to the November 2024 bond, although that move may be premature and is more likely to be announced later this year.

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