- AUD/USD regains positive traction on Tuesday in reaction to the hawkish outlook from the RBA.
- A modest USD pullback provides additional momentum and continues to support the pair’s move higher.
- Aggressive expectations around the Fed could benefit the dollar and limit the rise of the pair.
The pair AUD/USD has moved higher on Tuesday after the Reserve Bank of Australia (RBA) announced its monetary policy decision. The pair maintains its gains during the first half of the European session, currently stands just below the 0.6950 zone and, for now, it appears to have broken a three-day losing streak to hit a one-month low on Monday.
Australian dollar strengthens broadly in reaction to the RBA’s hawkish outlook that further rate hikes will be necessary to ensure inflation returns to target. It is worth mentioning that the Australian central bank raised its cash rate by 25 basis points early this Tuesday to a decade high of 3.35%. Apart from this, modest US dollar weakness acts as a tailwind for the AUD/USD pair.
Indeed, the DXY dollar index, which measures the performance of the dollar against a basket of currencies, is holding back the strong post-NFP rally and is weighed down by a combination of factors. A softer tone around US Treasury yields, coupled with signs of stability in stock markets, appear to weigh on the safe-haven dollar.. That being said, hawkish expectations around the Fed help limit any significant decline in the dollar.
The monthly US employment data, released last Friday, came in better than expected and highlighted the underlying strength of the labor market. This could allow the US central bank to continue raising interest rates in the future, which in turn favors USD bulls. This, in turn, warrants some caution before confirming that the AUD/USD pair’s recent pullback from its highest since June 2022 hit last week is over.
No market-relevant economic data will be released in the US on Tuesday. Therefore, attention will remain focused on Fed Chairman Jerome Powell’s speech, which will be closely scrutinized for further clues on the central bank’s future rate hike path. This, in turn, will play a key role in influencing USD price action and provide further impetus to the AUD/USD pair later in the American session.
AUD/USD technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
