AUDUSD Heads to 0.69 As RBA Remains Hawkish

AUDUSD continues to show strength, reaching new highs for 2024, driven by improved risk sentiment following the Federal Reserve’s 50 basis point rate cut. The U.S. dollar remains bearish, further supporting the pair’s rise. Last week, AUD/USD gained over a cent as markets responded to the Fed’s dovish tone, while the Reserve Bank of Australia (RBA) is maintaining a more hawkish outlook, with no indication of rate cuts on the horizon.

However, yesterday’s PMI data highlighted growing challenges for Australia’s economy, particularly in the manufacturing sector, which is experiencing a sharp decline. This has caused the overall economy to slip slightly into contraction. Although the services sector remains in expansion, its growth is slowing significantly. The data suggests that households are saving more, dampening consumer spending and contributing to weaker economic activity. Price pressures are easing, and employment growth has slowed, further indicating a cooling economy. Margin pressures and subdued consumer demand suggest that these economic challenges may persist into next year.

AUD/USD Chart Weekly – The 100 SMA Is Under Attack

Despite these concerns, AUD/USD moved higher on Tuesday, reaching its first key resistance level at the 100 SMA (red), which is aligned with last week’s high of 0.6840 on the weekly chart. This area could prove crucial in determining whether the pair can maintain its upward momentum or face resistance in the near term. Today we had the Reserve Bank of Australia (RBA) meeting, which was not expected to produce much in terms of interest rates changes.

Reserve Bank of Australia September 24 Policy Meeting

• RBA leaves cash rate unchanged at 4.35%, as expected
• Prior cash rate was 4.35%
• Latest data does not change previous assessment that policy is restrictive and working as anticipated
• The outlook remains highly uncertain
• Inflation is still some way above the midpoint of the 2% to 3% target range
• Returning inflation to target is the priority
• Underlying inflation remains too high
• Policy will need to be sufficiently restrictive until confidence returns that inflation is moving sustainably towards the target range
• RBA remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome
• The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range
• Data since then have reinforced the need to remain vigilant to upside risks to inflation
• RBA is not ruling anything in or out on next policy steps
• Full statement

AUD/USD Live Chart