RBA Hike Sends Aussie Lower
Aussie Fall Post-Hike
The Aussie Dollar is on the backfoot today following the latest rate decision from the RBA overnight. The bank hiked rates by a further .25%, as expected. However, bulls were left spooked by the bank’s admission that it had considered holding rates steady today. The meeting statement itself was hawkish with the bank retaining its warning over upside inflationary risks and an openness to further tightening if necessary. However, it was the post-meeting presser which ended up sinking the Aussie. RBA governor Bullock revealed that policymakers had been in two minds over today’s hike, citing risks to the housing market and the prospect of weaker global economic activity as a result of the ongoing conflict in the Middle East. These comments clearly unnerved bulls with AUD reversing from initial highs to break down to fresh lows for the month.
Near-Term Risks
Looking ahead, the likelihood of further RBA tightening this year now seems less convincing. However, the market is still pricing in a roughly 60% chance of a hike in November which seems quite high on the back of those comments. Perhaps the fresh strength in oil prices is being taken as a sign that those inflationary risks the bank warned about will indeed remain and end up forcing the bank to act again. However, if we do get any breakthrough on the US/Iran peace front and oil drops, AUD should sink further as traders scale back rate-hike expectations accordingly.
Technical Views
AUDUSD
The reversal lower has seen the market breaking down through the bull channel lows, now fast approaching a test of the .6942 level next. With momentum studies bearish, risk are geared towards a break lower with .6866 the deeper bear target to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.