The AUD/USD pair saw a significant increase on Friday following comments made by Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium. Powell hinted that the Fed is prepared to cut rates, causing the US Dollar to weaken and the Aussie to strengthen. Despite mixed economic signals from Australia, the Reserve Bank of Australia (RBA) continues to maintain a cautious stance due to high inflation, supporting the Australian Dollar.
The RBA’s reluctance to ease monetary policy was revealed in the latest meeting minutes, with projections indicating that inflation will stay above the 2-3% target until the end of 2025. This suggests that interest rates may remain elevated for an extended period. Governor Bullock recently stated that there are no plans to cut rates in the near term. Additionally, China’s efforts to support the housing market are not expected to have a significant impact due to underlying debt issues, but they do offer some support for the Australian Dollar.
From a technical analysis perspective, the AUD/USD pair has shown rising momentum and may consolidate in the near future. The pair rose to highs not seen since January around 0.6790, with the RSI indicating that it is near overbought levels. The MACD shows building bullish momentum, with strong interest from buyers reflected in high volume levels. Resistance levels to watch include 0.6800 and 0.6850, while support levels are at 0.6700 and 0.6650.
The Reserve Bank of Australia (RBA) plays a key role in setting interest rates and managing monetary policy for Australia. The RBA’s primary mandate is to maintain price stability and contribute to the stability of the currency, full employment, and economic prosperity for the Australian people. The RBA utilizes tools such as raising or lowering interest rates, QE, and quantitative tightening to achieve its objectives and influence the value of the Australian Dollar.
In modern times, moderately higher inflation tends to lead central banks to raise interest rates, attracting capital inflows from global investors seeking profitable investment opportunities. Macroeconomic data such as GDP, PMIs, employment, and consumer sentiment surveys can impact the value of the Aussie Dollar by influencing investor confidence in the economy. QE is a tool used by central banks like the RBA to provide liquidity by purchasing assets, which can result in a weaker Australian Dollar. On the other hand, quantitative tightening (QT) is undertaken when an economic recovery is underway, potentially leading to a stronger AUD.
