AUDUSD Forecast – Lower Ahead of Tuesday’s Widely Expected RBA Rate Hike

The Australian Dollar is trading at its low of the session on Monday as the U.S. Dollar extended its gains following Friday’s strong U.S. jobs report. The hotter than expected reading is being interpreted by traders as bearish since it likely means the Federal Reserve could stay hawkish for longer.

Last Wednesday, the Fed raised rates by 25 basis points and said it had turned a corner in the fight against inflation, leading investors to price in a more dovish path going forward.

However, Friday’s much better than expected labor market and services sector data has investors questioning that the Fed is almost done with its monetary policy tightening policy. As of Friday’s close, investors are now pricing in Fed rate hikes for March and June, with the peak terminal rate coming in at 5.03%. This is up from 4.88%.

At 09:53 GMT, the AUDUSD is trading .6897, down 0.0024 or -0.35%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.47, down $1.62 or -2.32%.

Also on tap for early Tuesday, is the Reserve Bank of Australia’s (RBA) latest monetary policy and interest rate decisions. Central bank policymakers are widely expected to raise the benchmark rate by 25 basis points and signal more hikes to follow.

The RBA faces the difficult task of trying to drive down inflation while dealing with a cooling economy.

Daily AUDUSD Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7158 will change the main trend to up.

The minor trend is also down. A trade through the next minor bottom at .6872 will reaffirm the downtrend.

The short-term range is .6629 to .7158. The AUDUSD is currently testing its 50% level at .6893.

On the upside, the nearest resistance is a minor 50% level at .7009. On the downside, the major target is the long-term 50% level at .6760.

Daily AUDUSD Technical Forecast

Trader reaction to the short-term 50% level at .6893 is likely to determine the direction of the AUDUSD on Monday.

Bearish Scenario

A sustained move under .6893 will signal the presence of sellers. This could trigger a further break into a pair of minor pivots at .6872 and .6860. The latter is a potential trigger point for an acceleration to the downside with .6760 the next major target.

Bullish Scenario

A sustained move over .6893 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for an intraday short-covering rally into .7009.