AUD/USD Technical: RBA hike has already been priced in, minor corrective decline in progress

AUD/USD Technical: RBA hike has already been priced in, minor corrective decline in progress

  • RBA hiked the official cash rate by 25 bps to 4.35% as expected.
  • Revised up slightly projected year-end 2024 Australia CPI inflation to be around 3.5% from 3.25% previously forecasted in August.
  • AUD/USD has declined by -64 pips intraday from yesterday, 6 November high of 0.6523.
  • Short-term momentum has turned bearish as depicted by the hourly RSI.
  • Watch the key short-term pivotal resistance at 0.6520 on the AUD/USD with intermediate support coming in at 0.6395/6370.

This is a follow-up analysis of our prior report, “AUD/USD Technical: Potential residual push down within bullish reversal configuration” published on 31 October 2023. Click here for a recap.

On the contrary, the AUD/USD did not shape the residual push down and staged a bullish breakout from the medium-term “Descending Wedge” bullish reversal configuration as highlighted in our previous report.

The recent bullish outburst of the AUD/USD in the past week has been reinforced by an increased odd that the Australian central bank, RBA may choose to restart its interest rate hike cycle today after four consecutive pauses on its policy cash rate to maintain it at 4.1%.

Based on the pricing from the ASX 30-day interbank cash rate futures as of yesterday, 6 November, the data has implied that there is a 50% chance of a 25 basis points (bps) hike in today’s RBA’s monetary policy meeting to bring the cash rate to 4.35% due to the recent hawkish vibes from the new RBA Governor Bullock and the recent uptick in the monthly CPI number for October.

At the risk of undergoing minor pull-back after a swift up move

Fig 1:  AUD/USD medium-term trend as of 7 Nov 2023 (Source: TradingView, click to enlarge chart)

Fig 2:  AUD/USD minor short-term trend as of 7 Nov 2023 (Source: TradingView, click to enlarge chart)

As seen on the short-term 1-hour chart, momentum has turned bearish on the AUD/USD as depicted by the breakdown seen in the hourly RSI momentum indicator.

If the 0.6520 short-term pivotal resistance (also the minor swing high areas of 30 August/1 September 2023) is not surpassed to the upside, the AUD/USD may see a further potential minor corrective decline towards the intermediate supports of 0.6420 and 0.6395/6370 (also the 20 and 50-day moving averages & the pull-back of the former “Descending Wedge” resistance) before a new potential bullish impulsive up move sequence unfolds.

However, a clearance above 0.6520 invalidates the corrective pull-back scenario for a squeeze-up to see the next intermediate resistance coming in at 0.6595 (also the 200-day moving average) in the first step.

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Kelvin Wong

Kelvin Wong

Senior Market Analyst, Asia Pacific at OANDA
Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities. Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets. In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.