AUD/USD plunges below 0.6700 after RBA 25 basis point rate hike

• AUD/USD falls to six-day lows and reverses gains from early Tuesday after the RBA announcement.
• The RBA increases rates 0.25% to 3.60%.
• Renewed US-China tensions and caution over Fed Chairman testimony also weigh on the pair.

AUD/USD has fallen close to 50 points after the Reserve Bank of Australia (RBA) announced its monetary policy decision in the Asian session on Tuesday. Geopolitical concerns surrounding US-China ties could add to the pullback of the Aussie. He cross has plunged from 0.6745 to 0.6695, new 6-day low.

The RBA has met market forecasts to raise the benchmark interest rate by 25 basis points (bp) to 3.60%. The Australian central bank has stated in its statement that it expects further monetary tightening to be necessary. However, fears of a lack of upside room for interest rates and the absence of a hawkish surprise in the comments appear to have weighed on AUD/USD. The RBA statement stating that the Consumer Price Index (CPI) indicator has peaked could be placed along the same lines.

Earlier in the day, Australia’s January monthly trade balance eased to 11,688B from 12,337B previously, as rising exports and imports joined bullish comments from Australian Prime Minister Anthony Albanese to favor buyers. Australian Prime Minister Anthony Albanese said earlier in the day: “I think Australia can avoid a recession”, also saying that relations with China have improved.

However, fears of renewed US-China clashes, due to the likely meeting between US and Taiwanese officials, as well as Beijing’s criticism of Washington’s cold war strategies, seem to challenge the AUD/USD pair due to its status as a barometer of risk.

In the coming hours, AUD/USD traders should pay attention to Fed Chairman Jerome Powell’s testimony and RBA Governor Philip Lowe’s speech on Wednesday for clearer indications.

AUD/USD Technical Analysis

A five-week-old descending resistance line precedes the 200 DMA to constrain short-term bullish moves in AUD/USD around 0.6745 and 0.6790 in that order, making the pair lucrative for bears below the indicated barriers. At time of writing, the cross is trading above 0.6715, losing 0.18% daily.