• The RBA boosted interest rates by 25 basis points, ending its four-month pause.
  • Investors perceived the RBA’s forward guidance as dovish.
  • The Australian dollar plummeted by up to 0.9% after the RBA announcement.

The AUD/USD price analysis turned bearish following the RBA’s rate adjustment and shifted the outlook that prompted speculation of an impending end to rate hikes. Notably, the RBA raised interest rates by 25 basis points on Tuesday, ending four months of stable policy. However, the RBA modified its language concerning the future outlook. 

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Carol Kong, a strategist at the Commonwealth Bank of Australia, noted that the RBA’s forward guidance was perceived as dovish. Consequently, the Australian dollar quickly reversed its gains following an initial rally.

Rates have risen by 425 basis points since May of the previous year, marking the most aggressive cycle in the RBA’s history. As a result, mortgage payments have risen significantly. Moreover, economic growth has slowed to a two-year low of 2.1%, and the RBA predicts it will approach 1% in 2024 as the full effects of higher rates take hold.

The possibility of a rate hike had emerged as consumer price inflation exceeded expectations in the third quarter. Additionally, the central bank’s forecasts for CPI were adjusted to 3.5% by the end of 2024, up from 3.3%. Furthermore, policymakers only expect inflation to reach the top end of the target range by the end of 2025.

Following the RBA’s announcement, the Australian dollar plummeted by up to 0.9% to $0.64305 during the session. 

AUD/USD key events today

Traders will keep absorbing the RBA rate decision and policy outlook as there are no other significant events set for the day.

AUD/USD technical price analysis: Bears pause at the 30-SMA support.

AUD/USD technical price analysis
AUD/USD 4-hour chart

The AUD/USD price has collapsed to the 30-SMA after briefly trading above the 0.6500 key level. Similarly, the RSI has entered bearish territory after trading in the overbought region. It indicates that the collapse was sudden and steep. However, bears are yet to break below the 30-SMA support. This would be a significant step in taking over control from the bulls.

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Moreover, a break below the SMA would allow bears to retest and likely break below the 0.6400 support level. However, it is also possible that the SMA will halt the decline. In that case, bulls would return to retest the 0.6500 resistance.

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Source: https://www.forexcrunch.com/aud-usd-price-analysis-rba-hikes-25-bps-with-cautious-tone/