AUD - AUD/USD: FOMC minutes and RBA interest rate decision preview
The AUD/USD is hovering near its highest level since Tuesday as investors wait for the latest interest rate decision by the Reserve Bank of Australia (RBA). The market is also waiting for the upcoming Federal Open Market Committee (FOMC) minutes that will come out on Wednesday.
RBA interest rate decision preview
The RBA will conclude its two-day meeting on Tuesday this week. Analysts polled by Reuters expect that the central bank will leave interest rates unchanged at 0.10%. Low rates have helped the country’s economy recover by incentivising household spending.
The key mover of the RBA decision will be the decision on the bank’s quantitative easing (QE) and yield curve control programs.
Analysts expect the bank to provide hints that it will start scaling down the asset purchases probably in September. Some analysts expect that the bank will reduce the amount of monthly bond purchases and extend them for longer than expected. Further, they expect that the bank will start moving from historically low-interest rates in 2022.
The decision comes at an important time for the Australian economy. The labour market has tightened as non-essential businesses in the leisure and entertainment industries reopen. Further, inflation has risen slightly while commodity prices remain at elevated levels. Home prices have risen to the highest level on record.
Earlier on Monday, data by Markit showed that the country’s services PMI declined to 56.8 in June. While this was a decline, a PMI reading of 50 and above is usually a sign that an industry is recovering. Last week, the Australian manufacturing PMI remained above 50.
The AUD/USD will also react to the latest FOMC minutes that will come out on Wednesday. These minutes will provide more details about the interest rate decision. In it, the bank left rates and QE unchanged and hinted that rates will start rising in 2023.
AUD/USD technical forecast
The hourly chart shows that the AUD/USD has formed a rounded top or inverted cup and handle pattern. Indeed, the recent jump is partly because of the formation of the handle part. The pair is also forming what looks like a bullish flag pattern. It is also slightly above the 25-day and 15-day exponential moving averages (EMA). Therefore, there is a possibility that the pair will resume the bullish trend and then move below the lowest level last week.
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