The AUD/USD pair saw an increase of 0.40% on Friday, reaching 0.6950. The Reserve Bank of Australia’s Governor, Michele Bullock, maintained a hawkish stance, which has contributed to the rise in the Aussie. The RBA’s prediction of only a 25-basis-point easing for 2024 has garnered interest in the Australian Dollar amidst mixed economic forecasts and increasing inflation.
Governor Bullock expressed caution regarding potential inflation risks and stated that it was too early to consider rate cuts. She also acknowledged the uncertainty in the economic outlook, mentioning that the bank does not foresee any rate cuts in the near future. The weak housing market data in the United States has also led to a weaker US Dollar, further benefitting the Aussie. As monetary policies continue to diverge, the AUD/USD pair may see more upside potential.
From a technical standpoint, the AUD/USD pair has shown volatility with a slight bias towards bullish momentum. The Moving Average Convergence Divergence (MACD) confirms this bias with rising green bars, while the Relative Strength Index (RSI) points to bullish market momentum. Key support levels lie at 0.6600-0.6630, with resistance near the 0.6650 region. A breakout in either direction could indicate further directional intent for the pair.
The Reserve Bank of Australia (RBA) plays a crucial role in managing Australia’s monetary policy and interest rates to maintain price stability, currency stability, full employment, and economic prosperity. The RBA holds regular meetings to make decisions regarding monetary policy, with the primary mandate being to maintain an inflation rate of 2-3%. Inflation, in modern times, can actually lead to higher interest rates, attracting global investors seeking profitable investments and strengthening the Australian Dollar.
Macroeconomic data, such as GDP, PMIs, employment figures, and consumer sentiment surveys, can impact the value of the Australian Dollar. A strong economy may prompt the RBA to raise interest rates, further supporting the Aussie. Quantitative Easing (QE) and Quantitative Tightening (QT) are tools used by central banks, including the RBA, to stimulate or restrict the flow of credit in the economy. QE involves the printing of currency to purchase assets, weakening the currency, while QT involves the reduction of asset purchases, which could strengthen the local currency. Overall, the RBA’s policies and economic indicators play a significant role in shaping the value of the Australian Dollar in the foreign exchange market.
