The Reserve Bank of Australia (RBA) is widely expected to keep the Cash Rate unchanged at 3.6% when it announces its decision at 10:30 PM ET.. We won’t get the economic projections at this meeting, so the focus will be on the statement and the press conference. The expectations are for the central bank to remain cautious and acknowledge the risks around inflation, but a hawkish shift in stance is a risk.
RBA Governor Michele Bullock noted that inflation has recently surprised to the upside and that the economy has likely reached, or is very near, its potential growth limit, even though the exact size of the output gap remains uncertain. She said the labor market is still a bit tight and that some of the recent rise in trimmed-mean inflation may prove temporary, but the RBA is watching the latest inflation data very closely. Bullock emphasized that if inflation turns out to be more persistent than expected, it would have important implications for monetary policy going forward.
The AUDUSD has been trending steadily higher since bottoming on November 21, with momentum boosted last week after CPI inflation ticked up to 3.8% from 3.6% the prior month. Since the November 21 low at 0.64206, the pair has climbed to a high of 0.66488, reached on Friday and approached again today, with intraday highs touching 0.6648.
A major turning point came on November 25, when the price broke above the 100-hour moving average (now at 0.6610) and the 200-day moving average. From there, buyers extended control, pushing the pair above the 200-hour moving average (currently 0.6532), the 100-day moving average, the 50% midpoint, and the 61.8% retracement of the decline from the September 17 high at 0.6563 and 0.6597 respectively. Today’s low at 0.6615 held just above the rising 100-hour MA, reinforcing that level as key short-term support.
Into the RBA rate decision, a break below the 100-hour MA at 0.6610 — and a stay below it — is step one for sellers looking to shift momentum. Below that, downside targets include:
• the broken 61.8% retracement at 0.65972
• the rising 200-hour MA at 0.6573
• the 50% midpoint of the September decline at 0.65635
On the topside, resistance sits first at the Friday/Today high of 0.66488
