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AUD/USD: Breakout from Consolidation in Reaction to RBA

AUD/USD: Breakout from Consolidation in Reaction to RBA

created Marcin Kiepas7 March 2023

Less hawkish than the last signal sent by Reserve Bank of Australia (RBA) became a signal for the AUD/USD exchange rate to break down from the weekly consolidation. The rest is up to the head of the Fed.

The Australian dollar (still) is falling in value

On Tuesday, the Australian dollar weakened against the US dollar, falling to 0,6672 from 0,6730 yesterday at the end of the day and testing the lowest levels since December 23, 2022. This gives rise to significant short-term changes in the technical system. The AUD/USD (H4) chart broke down from more than a week of consolidation in the 0,6698-0,6783 range. As it was preceded by a downturn of the MACD indicator from the equilibrium level, the supply signal generated in this way was additionally strengthened. This now makes us expect a drop to around 0,66. This is the minimum range of the discount after breaking down from the described consolidation.

AUDUSD H4_fxclub_07032023

AUD/USD H4 Chart. Source: Tickmill

The impulse to break AUD / USD (H4) was today's Reserve Bank of Australia (RBA) meeting. The bank, as expected, raised its main rate by 25 basis points to 3,60%, but it was accompanied by less hawkish than recent rhetoric. Philip Lowe, the head of the RBA at the post-meeting press conference, toned down the hawkish tone that was still present in February. Although he announced the necessity of further monetary policy tightening in Australia in order to bring inflation to the target, this announcement was not as clear as a month ago. In addition, he made the scale of this tightening dependent on the incoming data.

The situation on the AUD/USD chart (H4) suggests declines towards 0,66. However, whether the pair will actually get there will now depend on what Fed Chairman Jerome Powell will say about monetary policy at 16:00 p.m. His hearing at the US Senate Banking Committee is the most important event of the day in the financial markets and an important piece of the puzzle ahead of the March Fed meeting.

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About the Author
Marcin Kiepas
Tickmill UK analyst. Financial markets analyst with 20-year experience, publishing in Polish financial media. He specializes in the foreign exchange market, Polish stock market and macroeconomic data. In his analyzes he combines technical and fundamental analysis. Looking for medium-term trends, examining the impact of macroeconomic data, central banks and geopolitical events on the financial markets.