The Reserve Bank of Australia may cut interest rates again in May.

The Australian dollar continues to weaken as investors grow increasingly concerned about the domestic economy and escalating global trade wars. Markets are bracing for April 2, when President Trump is set to impose tariffs on countries that levy duties on U.S. goods, further heightening fears of a trade war. Additionally, uncertainty over China's economic stimulus plans is putting direct pressure on the Australian dollar, given Australia's strong trade ties with China. Some analysts predict that the Reserve Bank of Australia (RBA) may cut interest rates again as early as May.

Australia’s economic indicators showed a 0.1% monthly increase in February. Meanwhile, the growth rate of economic activity compared to future trends over the next 3 to 9 months rose to 0.8% from 0.6% in January. The latest figures indicate that the domestic economy continues to gain momentum gradually. Matthew Hassan, Head of Macroeconomic Forecasting in Australia, expects that slowing inflation will reassure the RBA to implement additional rate cuts this year, which would also help cushion the economy against tariff-related pressures.

The Reserve Bank of Australia is closely monitoring policy changes in the United States to assess their impact on the global economy and their effects on domestic activity and inflation. Sarah Hunter, Deputy Governor of the RBA, commented that the central bank needs to analyze data carefully to evaluate the impact on policy decisions. Currently, Australia is facing U.S. tariffs on steel and aluminum imports, along with supply slowdowns stemming from China's economic deceleration.

Jim Chalmers, Australia’s Treasurer, stated that Australia would avoid engaging in retaliatory tariff measures and criticized President Trump’s trade policies as self-destructive. He emphasized the importance of flexibility rather than retaliation amid rising economic challenges, including trade disruptions under the new U.S. administration, China’s slowing economy, and the war in Eastern Europe, all of which could lead to an overall economic slowdown or even a recession.

However, Australia's growth forecast for 2026 has been downgraded to 1.8% from 2.5%, marking a sharp decline from the RBA’s February projection of 2.3% for 2026. Meanwhile, the central bank's 2025 growth forecast remains at 1.9%. Despite the first rate cut in February, the RBA is expected to maintain a cautious monetary policy stance due to ongoing concerns about inflation.

The yield on 10-year Australian government bonds has surged to 4.44%, reflecting rising U.S. bond yields as the Federal Reserve remains in no rush to cut interest rates. Additionally, Australian bond yields have been supported by tighter signals from the RBA, which needs to assess U.S. policies before determining the outlook for the domestic economy.

Techical analysis data (5H)

Resistance: 1.5972, 1.6007, 1.6036

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.5877 - 1.5907 but cannot break the support at 1.5907, you may set a TP at approximately 1.6007 and SL at around 1.5842 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.5972 - 1.6007, you may set a TP at approximately 1.6036 and SL at around 1.5877 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.5972 - 1.6007 but cannot break the resistance at 1.5972, you may set a TP at approximately 1.5877 and SL at around 1.6036 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.5877 - 1.5907, you may set a TP at approximately 1.5842 and SL at around 1.6007 or according to your acceptable risk.

Pivot point March 22, 2025 08:55 PM. GMT+7