RBA expects rate hikes to end soon

Following Thursday's close, Australian equities rose due to increases in the IT services, energy, and telecommunications sectors, with the AUD/USD shifting only 0.39% to 0.66 and the US Dollar Index Futures falling 0.10% to 105.53.

Following a 350 basis point raise to the highest level in 11 years from the lowest 0.1% since May last year, most recently at a policy meeting on Tuesday, the rate has been pushed up by 25 points to 3.60%. The Governor of the Reserve Bank of Australia stated last Wednesday that because monetary policy implementation is now in a tight range, the RBA may be close to ending rate hikes, which are projected to end at the next policy meeting on April 4. While the RBA has discussed the impact of rate hikes over the last ten sessions and the impact of higher borrowing costs on households, it has also explained that the Australian economy has reached a point where it is appropriate to stop raising interest rates in order to have more time to assess the economic situation in the future. As a result, the market reduced its projection for the highest interest rate to 4.10%, down from 4.35% last week.

Australia's monthly consumer prices, or inflation, are estimated to have peaked in the most recent overall economy. In the December quarter, household consumption slowed dramatically. As a result, demand and supply are restored to a more balanced state. While the quantity of wage rises remains lower than predicted, the dangers of rising wages and prices (a price-wages spiral) are modest. Meanwhile, Australia's top four financial institutions are projected to pass on interest rate hikes to more mortgage clients this month, affecting total consumption due to variables such as cost of living pressures, higher interest rates, and decreased house value.

The US dollar, on the other hand, recently fell last Thursday as jobless claims in the US reached a 10-week high, jumping to 211,000 last week from 190,000 the previous week and exceeding the projected level of 195,000. This enhances the prospect of a weakening job market and diminishes the chance of the US Federal Reserve raising interest rates again.

Yet, according to the most recent Wednesday statistics on job vacancies, there were 1.9 jobs for every unemployed person in January, down from 2.0 in December. The Fed's Beige Book, which was published on Wednesday, states that the job market remained strong in February and addresses sporadic layoffs from organizations and companies. It also discusses how difficult it is to find workers with the necessary skills or experience, suggesting that the labor market is still tighter than anticipated.

As a result, with inflation and wage trends in Australia not as concerning as in the US, the US Federal Reserve, which is dealing with a continuously tight labor market, inflation, and strong consumer spending in January, is anticipated to keep trying to control inflation and raise interest rates more than expected, possibly by as much as 50 basis points at the next meeting. As a result, the Australian dollar is likely to be weaker than the US dollar over this period.

Data for Technical Analysis (5H) CFD AUD/USD

Resistance : 0.6599, 0.6608, 0.6622

Support : 0.6571, 0.6562, 0.6548                    

5H Outlook

1H Outlook

Source: Investing.com                   

Buy/Long 1 If the support at the price range 0.6566 - 0.6571 is touched, but the support at 0.6571 cannot be broken, the TP may be set around 0.6606 and the SL around 0.6563, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6599 - 0.6604, TP may be set around 0.6613 and SL around 0.6570, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6599 - 0.6604 is touched, but the resistance at 0.6599 cannot be broken, the TP may be set around 0.6569 and the SL around 0.6607, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6566 - 0.6571, TP may be set around 0.6555 and SL around 0.6602, or up to the risk appetite.       

Pivot Points Mar 10, 2023 06:13AM GMT

Sources: Investing 1, Investing 2