Aussie Sold Post-RBA

The Australian Dollar has come under pressure across early European trading on Tuesday as traders digest the latest monetary policy meeting from the RBA overnight. The bank held headline interest rates steady at 4.35%. However, the tone of the meeting was less hawkish than many were looking for, leading to the current sell-off in AUD.

Neutral Signalling

On the back of the recent uptick in quarterly inflation, many players were looking for a more hawkish stance from the bank. However, the bank stuck to a broadly neutral message on rates warning it was ruling nothing in or out on rates and would continue to monitor inflation.

Upside Inflation Threat

Despite the tone of the meeting and the selling we’re seeing in AUD, it’s fair to say that hawkish risks remain. Commenting during the press conference after the meeting, RBA governor Bullock warned that the bank had considered hiking at this meeting but ultimately decided policy was in a strong enough place to deal with inflation as is. However, she did say that there were upside risks which need to be monitored going forward.

Bullish Risks

In light of Bullock’s comments, there are clearly upside risks for AUD should inflation remain sticky at current levels. Any fresh push higher seems likely to run the risk of fresh rate hikes from the bank meaning that incoming inflation data will be keenly watched going forward.

Technical Views

AUDUSD

The rally in AUDUSD has stalled for now, just shy of testing the .6681 resistance. Momentum studies are bullish however, and while price holds above the .6520 support, focus is on a continuation higher and an eventual breakout. Above current resistance, .6857 is the next target for bulls. 

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