- The RBA holds rates at 4.35% after raising them three times this year, as it assesses the impact of previous tightening on the economy.
- Currently, AUD/USD is testing the 0.704-0.708 resistance area, with price action showing signs of stalling.
- The next immediate driver for AUD/USD is the US CPI report due on 12 August, which could influence the currency's movement significantly.
- The RBA believes that tighter policy is starting to have a real effect, as evidenced by softer consumer spending and a cooling housing market.
- For the AUD, the RBA's stance is supportive but not a definitive bullish signal, as it must overcome resistance and the US dollar's movements.
- If AUD/USD can close above 0.708, the next targets are around 0.718 and 0.723-0.727; otherwise, pullback levels are near 0.700 and 0.695.
The Reserve Bank of Australia (RBA) held its cash rate steady at 4.35% during its latest meeting, with all nine board members voting to maintain the current policy.
After three rate hikes this year, the RBA is now assessing the effects of its tightening measures on the economy before considering further increases.
This cautious stance places the RBA in a challenging position: there is insufficient evidence to justify an immediate hike, yet disinflationary pressures are not strong enough to signal the end of the tightening cycle.
The RBA's latest statement indicates that tighter monetary policy is beginning to show real effects, as evidenced by elevated trimmed mean inflation, reduced consumer spending, and a cooling housing market in major cities.
As for the Australian dollar (AUD), it is currently testing resistance levels between 0.704 and 0.708 against the US dollar (USD).6
The currency's ability to break through this resistance will depend significantly on upcoming US economic data, particularly the Consumer Price Index (CPI) report due on August 12.
A stronger US inflation reading could hinder the AUD/USD from rising, while a weaker print might provide the necessary momentum for a breakout above 0.708.
If successful, the next targets for the pair would be around 0.718 and 0.723-0.727, while a failure could lead to a drop towards the 0.683-0.687 support zone.
“The RBA sees tighter policy starting to work, with trimmed mean inflation still elevated but softer consumer spending and a softer labour market pointing to demand losing momentum. For AUD, the backdrop is supportive at the margin, but the currency must prove it can overcome resistance and whatever the US dollar does next.”
