The AUD/USD pair soared to the highest point since June 2021 after the latest interest rate decision by the Reserve Bank of Australia (RBA). The pair rose to a high of 0.7632, which is almost 10% above the lowest level this year.
RBA decision
The RBA concluded its two-day monetary policy meeting on Tuesday morning. In this meeting, the bank decided to do what most analysts were expecting.
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It left its interest rate unchanged at 0.10% and warned about the growing risk about the ongoing crisis in Ukraine. It noted that this crisis was leading to higher prices of raw materials and basic products as supply chain challenges persist.
The RBA expects that the Australian unemployment rate will remain below 4% in 2022 and 2023. Nonetheless, while the wage growth has been there, it is around the relatively low rates that existed before the Covid-19 pandemic.
The most closely watched statement was on the bank’s view about inflation. In the statement, the bank said that the headline inflation is about 2.6% in Australia. The statement said:
“Inflation has picked up and a further increase is expected, but growth in labour costs has been below rates that are likely to be consistent with inflation being sustainably at target.”
Analysts interpreted this move to imply that the bank was now ready to start hiking interest rates. In the previous meetings, it had hinted that the first interest rate hike will be in 2023. Now, analysts are pricing in the first hike to be in June this year.
First, the RBA will likely not want to be left behind by other central banks like the Federal Reserve and the Bank of England (BOE). Further, like other banks, it will likely want to have tools at its disposal in case of another global recession.
AUD/USD forecast
The AUD/USD price has been in a strong bullish trend in the past few months. On Tuesday, it managed to move above the important resistance level at $0.7537, which was the highest point in June last year. It has also risen above the important resistance 0.7443. The pair has moved above the 25-day and 50-day moving average and the 61.8% Fibonacci retracement level.
Therefore, there is a likelihood that the price will keep rising as bulls target the next key resistance level at 0.7800.
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Source: https://invezz.com/news/2022/04/05/heres-why-the-aud-usd-popped-after-the-rba-decision/