Aussie Trades in Narrow Range Ahead of RBA’s Cash Rate Decision, 50+ PIP Volatility Likely in AUD Parity; Aug 02, 2022

Reserve Bank of Australia’s Cash Rate Decision

Today RBA will declare Cash Rate Decision at 0430 GMT/1000 IST. The rate decision is usually priced into the market, so it tends to be overshadowed by the RBA Rate Statement, which is focused on the future. Short term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future.

Today will be the 4th consecutive interest rate hike by RBA and markets expect 50 bps hike to 1.85 pct in today’s meeting to combat inflation. Along with this, RBA’s Monetary Policy Statement will also remain in focus to forecast the further movement of the AUD against major peers. Westpac released latest statement on RBA that “Westpac anticipates that the cash rate will rise to 3.10% by year end and then peak at 3.35% in February 2023. The expected path is another 50bps in September, and then 25bps moves at each meeting after that.”

Australian economy is still facing an unemployment rate at around a 50-year low and with core inflation running at a 6% annualized pace. Lawmakers are trying to restrict inflation that’s running at more than twice the upper end of the RBA’s 2-3% target. Important to note here that the RBA is going to publish its quarterly update of forecasts on Aug 05 that is widely expected to show downgrades to economic growth and employment and a sharp increase in the inflation outlook.

Let’s see how AUD has reacted during the previous data release:

July 05:

June 07:

Technical View:

AUD/USD:

• The Aussie trades in narrow range ahead of RBA’s Cash Rate Decision and stabilizes above $0.7000 mark.
• Today pair made intraday high at $0.7032 and low at $0.7006 mark.
• A day chart is down and H1 chart with triple EMA suggests up trend for the time being.
• A sustained close above $0.7030 on H1 chart requires for the upside rally.
• Alternatively, a consistent close below $0.6990 will check further supports.

 
Take a look and do trade wisely!
Good Luck