The Australian dollar will be in the spotlight this week as the Reserve Bank of Australia (RBA) delivers its interest rate decision and as the country releases the January jobs report. The AUD/USD exchange rate soared to 0.6350 on Friday, much higher than this month’s low of 0.6080.
RBA interest rate decision
The AUD/USD pair rose ahead of Tuesday’s RBA interest rate decision. Economists polled by Reuters believe that the bank will opt to slash rates by 0.25% as it seeks to boost the struggling economy.
The RBA has been one of the most hawkish central banks in this cycle as it has resisted cutting interest rates. For example, the Bank of England has now slashed rates three times, while the European Central Bank has cut five times.
The case for a rate cut rate cut rose after the Australian Bureau of Statistics (ABS) published its fourth-quarter inflation data. The headline consumer price index (CPI) fell from 2.8% in Q3 to 2.4% in Q4. Further, the closely watched weighted and trimmed mean inflation numbers slipped.
These numbers signaled that the country’s inflation was moving in the right direction, making it easy for the bank to cut interest rates.
Australia will also publish the latest jobs numbers on Thursday. Economists expect the report to show that the jobless rate rose from 4.0% in December to 4.1% in January, while the participation rate remained intact at 67.1%. They expect the data to show that the employment change rose by 19.7k
While these jobs numbers are important, their impact on the AUD/USD pair will be limited since they will come two days after the RBA delivered its interest rate decision.
FOMC minutes
The other crucial catalyst for the AUD/USD exchange rate will be the upcoming FOMC minutes scheduled on Wednesday.
These minutes will provide more information on what happened during the last meeting. In it, officials decided to leave rates unchanged at 4.50% and hint that they will deliver just two cuts this year.
It is unlikely that the minutes will have a major impact on the US dollar since they will come a week after the US published the January inflation report and after Jerome Powell testified before the House and the Senate.
The inflation report showed that prices continued rising in January, with the headline consumer price index (CPI) rising from 2.8% in December to 3.0% in January and the core inflation moving from 3.2% to 3.3%.
Jerome Powell and Beth Hammack, another Fed official, confirmed that the bank was not in a hurry to cut interest rates. As such, analysts now expect the bank to either hold rates steady this year or deliver just one cut. Besides, Trump’s tariffs will worsen the inflation sitiuation in the country.
AUD/USD technical analysis
AUDUSD chart by TradingView
The AUD/USD exchange rate has rebounded in the past few weeks, moving from a low of 0.6080 to 0.6350, its highest level since December last year.
It has jumped above the 23.6% Fibonacci Retracement level and the 50-day moving average. The Relative Strength Index (RSI) and the MACD indicators have all pointed upwards.
Therefore, the pair will likely keep soaring as bulls target the 50% Fibonacci Retracement point at 0.6515, up by about 2% from the current level.
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