RBA Set to Hike by 25bps

• The release of some encouraging economic reports boosted the dollar.

• Australian inflation has eased but is still well above the RBA’s target.

• The Reserve Bank of Australia is likely to raise interest rates by 25 basis points.

Weekly forecasts for AUD/USD are slightly bullish as investors expect a rate hike at Tuesday’s RBA meeting.

AUD/USD up and down

Despite the strong dollar, AUD/USD ended the week well above its lows on hopes of a RBA rate hike next week. In particular, the release of some encouraging economic reports boosted the dollar.

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The US economy showed resilience as positive data emerged on the housing market, consumer confidence and durable goods orders. In addition, there was some positive news regarding US GDP and initial jobless claims. These reports further strengthened expectations for further interest rate hikes by the Fed.

Australia’s inflation has eased but remains well above the RBA’s target, necessitating further interest rate hikes. In addition, the Australian labor market remains hot and calls for further policy tightening.

Major AUD/USD Events Next Week

Next week will be an important week for AUD/USD as investors await the RBA policy meeting on Tuesday. Important reports from the US, such as the FOMC minutes and employment data, are also due.

The RBA is likely to raise interest rates by 25 basis points to 4.35% on Tuesday to curb persistently high inflation.

On the other hand, the NFP report will affect the outlook for US interest rates. The report will find out whether the current high interest rates are working to reduce demand in the labor market.

AUD/USD Weekly Technical Forecast: Bulls Take Over at 0.6600 Support.

AUD/USD fell last week and paused at the 0.6600 support level. Aussies have moved sideways for a long time. It has broken below the 22-SMA, indicating that neither the bears nor the bulls intend to push the price far from the SMA.

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At the same time, the RSI is above the critical 50 level, indicating frequent changes in sentiment. As such, the price bounced multiple times in retesting the 0.6600 support. Similarly, 0.6800 acted as strong resistance.

Currently, the price seems set to reverse at the 0.6600 support. If the bulls take over, the price could break out of the 22-SMA and retest 0.6800.

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