Market expects RBA to hold its rates at Tuesday meeting

The latest Australian inflation data showed that inflation slowed to an eight-month low in February, partly due to lower fares and accommodation costs. The figures back up the Reserve Bank of Australia's (RBA) decision to temporarily pause interest rate hikes at its monetary policy meeting on Tuesday, even as the Australian Government continues to warn of rising cost of living pressures across the country.

According to the most recent Australian Bureau of Statistics data, which was released on Wednesday, the Consumer Price Index (CPI) increased 6.8% in February, which is lower than the previous month's figure of 7.4% and the forecasted number of 7.1%. This is the lowest rate of increase since June last year.

Due to this, half of the analysts predict that the RBA will maintain interest rates at their current level of 3.60%, while the other half predicts that the RBA will raise the rates by 25 basis points to 3.85% at its upcoming policy meeting. RBA Governor Philip Lowe had earlier stated that the central bank was on the verge of ceasing rate hikes since the monetary policy is getting close to its threshold and is expected to postpone modifications to its stance in April.

Meanwhile, among the major local banks, ANZ and NAB expect the RBA to raise interest rates at its April meeting, with ANZ expecting a terminal rate of 4.10%, while CBA and Westpac expect the RBA to temporarily suspend policy and raise interest rates again in the second quarter.

At the same time, experts have slightly changed their previous month's forecast for Australia's inflation expectations. Inflation is predicted to stay high until the third quarter of 2024, with average inflation expected to be 5.4% this year and 3.1% in 2024, up from earlier forecasts of 5.2% and 2.9%.

While the US dollar currency pair, Fed policymakers anticipate holding interest rates at current levels through the end of the year in order to restore inflation to 2%, which is likely to be accomplished within the next two years. On the other hand, they will attempt to consider the impact of rising interest rates on financial stability while inflationary pressures remain high following the recent banking sector turbulence. The Fed anticipates US GDP to increase moderately this year and accelerate in 2024, with the unemployment rate, which is presently at 3.6%, likely to climb to around 4.5% next year, causing the Australian dollar to devalue versus the US dollar ahead of the RBA policy meeting on Tuesday.

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

Resistance : 0.6599, 0.6608, 0.6622

Support : 0.6571, 0.6562, 0.6548              

5H 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 Apr 03, 2023 03:20AM GMT

Sources: Investing 1, Investing 2