The Australian dollar has declined in the past six straight weeks as concerns about the strong US dollar. The AUD/USD pair is trading at 0.7052, which was the lowest level since January 2022. It has dropped by over 7.81% from its highest level in April.
RBA interest rate decision preview
The Reserve Bank of Australia started its two-day meeting on Monday morning. It will then deliver its decision on Tuesday. Economists expect that this will be an important meeting by the bank since 2020.
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Most analysts expect that the RBA will decide to hike interest rates by a small 0.15%, making it the first hike in years. Others expect that the bank will hike interest rates by 0.25% while others believe that it will leave rates unchanged.
A rate hike will offer an about-turn for the RBA. In 2021, the bank insisted that it would start hiking interest rates at least in 2023 or 2024.
The decision comes at an important time for the Australian economy. For one, the country’s consumer price index (CPI) has jumped to the highest level in more than 20 years. This increase happened as the prices of oil and gas soared.
Other numbers have shown that the Australian economy is doing well. Data published in April revealed that the unemployment rate dropped to 4.0% in March, the lowest it has been before the pandemic started. The participation rate was at 66.4%.
Retail sales and home prices have kept rising in the past few months while the country has benefited from the rising commodity prices.
Still, there are concerns about the health of the Chinese economy. Recent numbers have shown that the Chinese economy is struggling due to the Covid-zero strategy. The manufacturing PMI dropped to 47.4 in April, the lowest level in more than two years.
AUD/USD forecast
The AUD/USD pair has been in a strong downward trend in the past few weeks. It dropped to a low of 0.7036, which was the lowest level since February 1. The 25-day and 50-day exponential moving averages have also made a bearish crossover pattern. The Stochastic Oscillator and the Relative Strength Index (RSI) have moved to the oversold levels.
Therefore, the pair will likely keep falling ahead of the upcoming RBA decision. The next key level to watch will be at 0.700, which is a psychological level.
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Source: https://invezz.com/news/2022/05/02/aud-usd-forecast-extremely-oversold-ahead-of-rba-decision/