The Australian Dollar (AUD) continued to strengthen in Wednesday’s session after the Reserve Bank of Australia (RBA) decided to maintain its official cash rate at 4.35%. The RBA’s hawkish hold was supported by concerns over high inflation, leading to speculation that the RBA might be one of the last G10 central banks to cut interest rates. This decision has the potential to bring sustained gains for the Aussie, although there were no significant economic highlights for the currency on Wednesday.
The RBA’s commitment to maintaining its current interest rate reflects its cautious approach to monetary policy, with Governor Bullock confirming discussions around potential rate hikes and ruling out the possibility of rate cuts for the time being. Despite concerns over inflation persisting above target levels, the RBA expects it will take some time before it is sustainably within the target range. Market expectations suggest a possibility of rate cuts by December 2025, with potential rate hikes in August and September not completely dismissed. However, challenges for the Aussie may arise from concerns over the slow momentum in the Chinese economy following the pandemic.
Technical analysis of the AUD/USD pair shows signs of a potential rebound in bullish signals, with the RSI moving above 50 and the MACD indicating a decline in selling pressure. However, confirmation of a buying trend will require the pair to clear the 20-day SMA. Until then, it cannot be considered a confirmed buying signal. With the upcoming release of Judo PMI figures from June on Friday, further market movements and potential price shifts for the Aussie are anticipated based on economic data.
Overall, the Australian Dollar remains on solid ground following the RBA’s decision, supported by its stance on interest rates and concerns over inflation. While challenges may arise from external factors such as the Chinese economy, the Aussie is expected to continue its gains as one of the last G10 central banks to cut interest rates. Traders and investors will be closely watching economic data releases and monetary policy decisions to gauge the future direction of the Australian Dollar and potential trading opportunities.
