The AUD/USD exchange rate experienced a decline over three consecutive days as market participants responded to the Federal Reserve’s hawkish stance on interest rate cuts. The price has declined to the 50-day moving average, with attention now turning to the forthcoming decision by the Reserve Bank of Australia. The AUD/USD pair experienced a decline as the US dollar surged in response to the October interest rate decision. The bank has opted to reduce interest rates by 0.25%, bringing them to a range of 3.75% to 4%. The report highlighted the deteriorating labor market conditions and noted that inflation has shown some signs of moderation. Jerome Powell stated that the bank might not reduce interest rates in the upcoming meeting, contrary to the expectations of analysts and economists.
The forthcoming AUD/USD pair will hinge on the Reserve Bank of Australia interest rate decision scheduled for Tuesday. According to a survey, economists anticipate that the bank will maintain interest rates at 3.6%. The primary factor contributing to this is the robust inflation report released by Statistics Australia. The analysis indicates that the trimmed mean inflation rate increased to 3.0% in Q3, up from 2.7% in the prior quarter. The headline Consumer Price Index increased from 2.1% in Q2 to 3.6% in Q3. This indicates that the figure has deviated further from the bank’s target of 2.0%. Goods inflation surged to a five-quarter peak as automotive fuel prices escalated.
Consequently, the bank may face challenges in reducing interest rates, as such actions could lead to an increase in inflation. Additionally, recent data indicates that the Australian labor market continues to exhibit strength. The daily timeframe chart indicates a slight decline in the AUD/USD pair concurrent with an increase in the US Dollar Index. The asset declined as the pair established a double-top pattern at 0.6612, with the neckline positioned at 0.6438, marking its lowest point in September. The pair has shown stabilization at the 50-day Exponential Moving Average.
On the positive side, it has established a megaphone or a rising broadening wedge pattern. The implication is that the pair could continue to appreciate over the long term. However, the pair could decline to the lower boundary of the wedge before potentially rebounding. A breach beneath the lower boundary of the wedge will indicate further downside potential.