Categories: Markets

AUD/USD trims RBA-led gains, dips below 0.7200

AUD/USD trims RBA-led gains, dips below 0.7200
  • The Australian dollar extended its losses against the USD, falling 0.12%.
  • The unexpected 0.50% rate hike by the Reserve Bank of Australia (RBA) has pushed the major currency higher; negative sentiment has erased AUD/USD’s gains.
  • Investors’ attention is focused on US CPI and UoM consumer sentiment data.
  • AUD/USD Price Forecast: A daily close below 0.7200 could drop the pair towards 0.7100.

The AUD/USD trims some of Tuesday’s gains after the Reserve Bank of Australia (RBA) surprisingly hiked rates by 50 basis points. However, negative investor sentiment is weighing on high-beta currencies such as the Australian dollar, with the biggest drift below the 100-day moving average (DMA). At 0.7199, the AUD/USD is within 30 pips of the latter in the American session.

Australian dollar lower despite RBA rate hike

Summing up the RBA’s decision, the central bank said inflation is higher than expected, the labor market is tight and the economy is strong. According to the RBA, it was necessary to reduce the monetary stimulus introduced when the global Covid-19 pandemic hit and underlined the need for further rate hikes in the following months.

Analysts at Commerzbank wrote that “the RBA’s tightening approach should support the AUD, but as long as China’s economic developments remain unclear, AUD gains are likely to remain limited.”

Meanwhile, European stocks ended Wednesday’s session with losses, while US stocks remain in the red. Rising US Treasury yields weigh on stocks and support USD. The 10-year US Treasury yield stands at 3.007%, up nearly three basis points, while the dollar index, which measures the value of the dollar against a basket of rivals, is up 0.10% to 102,436.

The factors mentioned above weighed on AUD/USD, which was unable to sustain the rally provided by the RBA rally. On Wednesday, AUD/USD retraced from daily highs around 0.7234 and back below 0.7200, reflecting a risk-off mood.

On the other hand, the OECD is the next international organization to lower expectations of a higher rate of global economic growth. For 2022, the OECD estimates a growth of 3.0%, lower than the estimated 4.5%, and for 2023, it will reach 2.8% year-on-year, lower than the 3.2% forecast.

In the week ahead, the US calendar will include initial jobless claims for the week ending June 4, followed by consumer inflation data, along with consumer sentiment for the University of Michigan.

AUD/USD Price Forecast: Technical Outlook

During the day, AUD/USD broke below the 200 DMA at 0.7228 and approached the 50 DMA at 0.7208. At the time of writing, the selling pressure on the AUD/USD caused the pair to drop below 0.7200. At the same time, the Relative Strength Index (RSI) is pointing lower, and although it is in bullish territory at 54.28, its slope signals weak demand for the pair.

Therefore, the AUD/USD would resume its downtrend. That said, the first support for the major would be the June 7 low at 0.7157. A break below would expose the daily low of June 2 at 0.7140, followed by the daily low of May 27 at 0.7089.

Technical levels

AUD/USD

Panorama
Last Price Today 0.7197
Today’s Daily Change -0.0037
Today’s Daily Change % -0.51
Today’s Daily Opening 0.7234
Trends
20 Daily SMA 0.709
50 Daily SMA 0.7217
100 Daily SMA 0.723
200 Daily SMA 0.7257
levels
Previous Daily High 0.7248
Previous Daily Minimum 0.7156
Previous Maximum Weekly 0.7283
Previous Weekly Minimum 0.714
Monthly Prior Maximum 0.7267
Previous Monthly Minimum 0.6828
Daily Fibonacci 38.2% 0.7213
Daily Fibonacci 61.8% 0.7191
Daily Pivot Point S1 0.7178
Daily Pivot Point S2 0.7122
Daily Pivot Point S3 0.7087
Daily Pivot Point R1 0.7269
Daily Pivot Point R2 0.7304
Daily Pivot Point R3 0.736

Source: Fx Street