Is the AUD/USD a buy or sell after the RBA interest rate decision?

The AUD/USD pair moved sideways on Tuesday morning as investors reacted to the latest interest rate decision by the Reserve Bank of Australia (RBA). It is trading at 0.7248, which is slightly below this week’s high of 0.7285.

RBA decision 

The RBA concluded its two-day meeting on Tuesday morning and did what most analysts were expecting. The bank decided to leave its interest rates unchanged and warned about the impact of the war in Ukraine on the global economy. 

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It left the cash rate target at 10 basis points, where it has been in the past few months. It also left the interest rate on exchange settlements at 0%.

In the statement, the RBA said that the Australian economy was doing well and that the unemployment rate has dipped to a 24-year low of 4.2%. This rate is even better than where it was before the pandemic started. Therefore, since Australia has reopened its borders, there is a likelihood that the situation will continue to improve. The bank expects that the rate will fall below 4% later this year. 

Most importantly, the RBA expects that the wage growth index will keep improving as the labour market tightens. At the same time, the RBA expects that inflation will remain at elevated levels due to the rising commodity costs amid the war in Ukraine. It expects that the headline inflation will rise to about 3.75% in the coming quarters. It will then drop to 2.75% in 2023.

In a statement, the RBA said:

While inflation has picked up, it is too early to conclude that it is sustainably within the target range. There are uncertainties about how persistent the pick-up in inflation will be given recent developments in global energy markets and ongoing supply-side problems.

AUD/USD forecast

The daily chart shows that the AUD/USD pair has been in an upward trend in the past few days even amid the crisis in Ukraine. The pair has managed to move above the 23.6% Fibonacci Retracement level. 

It has also risen above the 25-day and 50-day moving averages while oscillators like the Relative Strength Index and The Stochastic has pointed upwards. 

Therefore, the pair will likely keep rising as bulls target the next key resistance at 0.7370, which is along the 38.2% Fibonacci retracement level.