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The RBA played it straight today, offering no major surprises as they raised the cash rate by 50 bps to 2.35% and hinted that rates are now in neutral territory. The thing about their latest move is that they are now very much following what the Fed is doing, so essentially one can think of it as the US central bank as being at the wheel while the RBA is merely the passenger going along for the ride.
That means if the Fed decides to slow down in the tightening cycle, so will the RBA. In that sense, the aussie can’t really find the edge in terms of policy backdrop. And when you weigh that against the landscape of falling equities, growing economic worries, and the dollar still being the cleanest shirt among the dirty laundry, it’s hard to see AUD/USD gain materially.
The only comfort is that the aussie isn’t going to perform as badly as the likes of the yen, euro, and pound in this environment. But in the case of an extended drop in equities, the aussie may still find itself in a tough spot as global recession worries play out.
For now though, the technicals suggest a likely return for AUD/USD towards the July lows with the head and shoulders pattern looking to exert itself on price action in the pair:
The July lows around 0.6681-14 will be the next key support region to watch alongside weekly trendline support (August to November 2021 lows) at around 0.6692. The weekly chart also points to support from the 50.0 Fib retracement level at 0.6756 so the confluence of support levels will be vital in trying to keep the pair afloat for the time being: