The Reserve Bank of Australia are set to update the market on their latest interest rate decision this week and the market is pricing in a good chance that we see another 25-basis point rate hike from them. Futures markets are pricing in the chance of a hike at around 80% which would take the Cash Rate up to 4.35% from 4.10% as the bank looks to combat sticky inflation – up to 4.6% y/y at the last print – that could get worse if the situation in the Middle East with regard to energy prices does not improve soon. The Australian jobs market is proving resilient in the face of the strong inflation numbers which has reinforced calls for a hike at this meeting.
The Aussie dollar is trading near multi-year highs just above the 72-cent level and a ‘hawkish hike’ from the RBA on Tuesday should see the currency appreciate further and push into fresh topside ranges for the medium term. However, a ‘dovish hike’ with little in the way of an indication of further hikes to follow or even no hike at all – which is still a 20-25% chance – would lead to some good selling of the pair and push it back into recent levels.
Short term resistance on the Daily Chart now comes in just above current levels while the June 2022 High just under 73-cents will be the next target, while initial downside support will come in around the 0.7100 level with stronger support around 0.6950.
Resistance 2: 0.7282 – June 2022 High
Resistance 1: 0.7227 – 2026 High and Trendline Resistance
Support 1: 0.7096 – Trendline Support
Support 2: 0.6943 – Long-Term Trendline Support
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