AUD/USD: Under pressure and at risk of a break below 0.74 – Westpac

The Reserve Bank of Australia policy statement Tuesday saw the A$ all but hit 0.7600 for a brief moment. However, the press conference 90 mins later quickly reversed that move. The commodity story remains super supportive, but with the RBA painting a very dovish picture over this week’s more hawkish policy tweaks, the time is not yet nigh to buy AUD/USD, in the view of analysts at Westpac. 

The RBA is unlikely to be among the first to raise interest rates

“The RBA governor was very clear that he is not thinking about hiking rates in 2023 given that Australia has not been near its inflation target in many years; that full employment is likely in the ‘low 4s’ and that it needs to stay there for a period of time to generate inflation sustainably within the 2-3% band.” 

“The speedy rejection of the 0.76 level has added weight to negative technical signals. A break of the 0.7400/25 level would argue for another leg lower.” 

“The flipside of course is that the commodity story remains super supportive. Since Dec 2019, met coal is up 35% at 2yr highs; thermal coal is up 96% at 12yr highs; iron ore is up 140% at close to all time highs and LNG spot prices in Asia have risen by 190% to fresh 7 yr highs.”