Turning to the AUD/USD pair, investor focus will shift to Tuesday’s RBA interest rate decision. Economists expect the RBA to cut interest rates by 25 basis points to 3.6%. Barring a surprise hold or larger 50-basis-point rate cut, the RBA’s policy guidance will be crucial for AUD/USD trends.
Natixis Asia Pacific Chief Economist Alicia Garcia Herrero remarked on the upcoming RBA’s interest rate decision, stating:
“Only a 25bp hawkish cut will be delivered in August. The fight against inflation seems to have been finally, at least for now, opening the door for the Reserve Bank of Australia (RBA) to ease at the policy meeting on August 12th.”
AUD/USD Daily Outlook: The Fed Cues and Rate Differentials
Later today, Fed chatter could fuel speculation about multiple Fed rate cuts and affect US-Australian interest rate differentials.
Hawkish Fed policy signals would widen the rate differential in favor of the US dollar. A less hawkish Fed rate path could push AUD/USD toward the 50-day EMA. If broken, the bears may target the 200-day EMA.
Conversely, support for a 50-basis-point September Fed rate cut would narrow the rate differential. A more dovish Fed rate path could drive AUD/USD toward the $0.66 resistance level. A sustained move above the $0.66 level opens the door to testing the July high of $0.6625.
