The AUD/USD has reacted to the RBA’s 50 basis point rally with a bounce of just over 20 pips that has taken it to lows of the first day at 0.6789 before rising to 0.6812. Before the European open, the pair remains slightly positive around 0.6800.
In its meeting today, the Reserve Board of the Bank of Australia (RBA) decided to raise the cash rate to 2.35%, as expected. It has also increased the interest rate on foreign exchange settlement balances by 50 basis points, to 2.25%.
The RBA will continue to raise rates but without a pre-established path
The central bank statement has highlighted that the Inflation in Australia is the highest since the early 1990s and it is expected to continue to increase in the coming months. Inflation is expected to peak later this year and then decline back into the 2-3% range.
The entity points out that the labor market is very tight and many companies have difficulties hiring workers. The Unemployment rate continued to decline in July to 3.4%, the lowest rate in nearly 50 years.
The Council expects to raise interest rates in the coming months, but it does not have a pre-established path. The magnitude and timing of future hikes will be guided by the data received and by the Council’s assessment of the outlook for inflation and the labor market.
AUD/USD Levels
With traders digesting a previously priced-in announcement in the market, the focus now shifts to sentiment and US ISM Services PMI data due out at 1400 GMT.
At the time of writing, the AUD/USD trades above 0.6802, gaining 0.08% daily. In case of heading to the upside, initial resistance appears at 0.6832, maximum of the day. Above it awaits the ceiling of Friday September 2 around 0.6855and then the region 0.6900/05where is the maximum of August 31.
To the downside, key support is around 0.6771/72, lows at the beginning of September and for the last seven and a half weeks. Below, the pair could slide to 0.6681floor of July 14 and of the last two years.
Source: Fx Street
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