AUD/USD Forex Technical Analysis – Steady Gains Ahead of RBA Interest Rate Decision

The Australian Dollar is edging higher shortly before the release of the Reserve Bank’s (RBA) interest rate decision at 03:30 GMT.

The RBA is leaning towards the dovish end of the spectrum and is expected to raise interest rates by a more modest 25 basis points, even after a report last week showed inflation raced to a 32-year high last quarter.

At 02:50 GMT, the AUD/USD is trading .6441, up 0.0043 or +0.67%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $63.33, down $0.19 or -0.30%.

At its last meeting on October 4, the RBA surprised markets by lifting interest rates by a smaller-than-expected 25 basis points, saying they had already risen substantially, although it added that further tightening would still be needed.

With a 25-basis point rate hike, the RBA would still trail the U.S. Federal Reserve, which is expected to raise its benchmark by 75-basis points on Wednesday.

On paper, this is bearish for the AUD/USD. However, the Fed may also announce it is going to start slowing the pace of rate hikes starting in December. This move could trigger a short-term, short-covering rally, but longer-term, the U.S. Dollar would be the more attractive asset.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6522 will change the main trend to up.

The minor trend is up. A trade through .6368 will change the minor trend to down. This will shift momentum to the downside.

On the upside, the key resistance is the long-term Fibonacci level at .6466. On the downside, the nearest support is a minor pivot at .6346.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fib level at .6466 will determine the direction of the AUD/USD on Tuesday.

Bullish Scenario

A sustained move over .6466 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the main top at .6522, followed by the resistance cluster at .6543 to .6548.

Taking out .6548 could trigger an acceleration into .6631.

Bearish Scenario

A sustained move under .6465 will signal the presence of sellers. This could trigger a sharp break into .6368, followed by .6346.

Taking out .6346 could trigger an acceleration to the downside.