Today’s AUD/USD outlook is bullish. An increase in the minimum wage fueled expectations for the RBA to raise rates again next week. This led to a surge in the Australian dollar.

Starting from July 1, Australia will implement a 5.75% hike in the minimum wage to address the challenges families face due to high living costs. However, businesses and some economists argue that this decision could escalate inflation and interest rates.

On Friday, the independent Fair Work Commission (FWC) determined the 5.75% pay raise for workers on awards tied to the minimum wage. Su-Lin Ong, the chief economist at RBC Capital Markets, warned that this raise might surpass the Reserve Bank of Australia’s projected peak of 4% for wage growth. Consequently, the RBA would push interest rates higher to counter inflation.

Futures trading already reflects expectations of the cash rate, currently at 3.85%, reaching 4.1% by August.

Furthermore, there is a 33% chance that the RBA might surprise the market with a quarter-point increase as early as next week. This follows an inflation report for April that indicated higher-than-expected inflation levels.

Meanwhile, the US dollar remained at a low point against major currencies, approaching a one-week low. It will likely experience its worst week since mid-January as market sentiment strengthens in favor of the Fed refraining from raising interest rates this month. 

AUD/USD Key Events Today

Investors are eagerly awaiting employment data from the US. This data will further affect rate hike bets for the June policy meeting, causing a lot of volatility in the market.

AUD/USD Technical Outlook: Bullish Trend Reversal

(Click on image to enlarge)

AUD/USD 4-hour chart

By breaking above the 0.6550 resistance level, AUD/USD has further confirmed a trend reversal and a bullish sentiment shift. The price now sits well above the 30-SMA while the RSI trades above 50, showing solid bullish momentum.

Currently, bulls are on the verge of crossing above the 0.6600 resistance level. If they succeed, the next target is at 0.6650 resistance. However, if the 0.6600 resistance holds, the price will likely retest the 0.6550 level.

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