Will the hawkish tone in Australia be followed?
The next round of central banks policy meetings started today with RBA. On early Tuesday in Australia, Reserve Bank did not change the policy, however, unlike previous meetings, signaled higher interest rates are much closer. For now, RBA holding the key rate at a record low of 0.10%, as was widely expected. However, with the announcement tone, market participants are waiting to see RBA hike rates in a few months, most likely in the June meeting.
On the other hand, the Dollar Index, which tracks the greenback against a basket of six other currencies, regained earlier losses and now trading higher, close to the 99 mark. Last night the dollar index tested a one-week high of 99.083. This week we will have the Federal Reserve policy meeting minutes on Wednesday, and traders will be watching that closely to see what will be the possible decision of FOMC members in the next meeting. After great employment numbers and fast inflation raising, expectations from the central bank to be a bit more aggressive at its May meeting are increasing, which means most probably the hawkish tone of the Reserve bank of Australia will be followed at least by FED.
Anyway, after the meeting and announcement, AUD/USD rose 1.3% to 0.7638, to test a nine-month high. The pairing created key support at 0.7540, which is the higher bank of its long time range movement between 0.7474 and 0.7540. With trading above main Daily Moving averages, and increasing MACD histograms way above zero level, technical indicators also remain bullish. On the flip side, any downtrend, first of all, will need to breach 0.7474.