Australian Dollar extends recovery post RBA decision

• Australian Dollar regains ground lost in recent sessions, buoyed by RBA hawkish hold.
• Aussie might gain further ground as the RBA will probably be one of the last G10 central banks to cut interest rates.
• There won’t be any relevant economic highlights on Wednesday for Aussie.

In Wednesday's session, the Australian Dollar (AUD) continued to smile and trade with gains against its peers following the Reserve Bank of Australia’s (RBA) hawkish hold on Tuesday.

While traces of weakness persist in the Australian economy, continuing high inflation prompted the RBA to delay any prospective rate cuts. This move positions the RBA to be among the last G10 central banks to initiate rate cuts, a factor that could bring sustained gains for the Aussie. The next highlights will be in Friday’s sessions when Australia releases Judo PMI figures from June.

Daily digest market movers: AUD continues strong following RBA’s decision

• In accordance with anticipation, RBA held a restrained tone and maintained its official cash rate (OCR) at 4.35%, noting that "the Board is not ruling anything in or out."
• Governor Bullock further clarified the RBA's position during her press conference by confirming rate hike discussions and negating the consideration of rate cuts at this time.
• She emphasized the RBA's persisting concerns over inflation, suggesting a high threshold for policy easing.
• RBA maintained its observation that "inflation remains above target and is proving persistent", reiterating that "the Board expects that it will be some time yet before inflation is sustainably in the target range."
• Money market anticipates approximately 50 bps of easing by December 2025, with possibilities of rate hikes in August and September not being entirely dismissed.
• On the negative side for the Aussie, the slow momentum in the Chinese economy, particularly the persistent failure to regain strong traction post-pandemic, may pose additional challenges for the Australian currency.

Technical analysis: Bullish signals rebound but await confirmation

Technical indicators show signs of recovery with the Relative Strength Index (RSI) once again moving above 50, suggesting a potential change in momentum toward buying. The Moving Average Convergence Divergence (MACD) is illustrating a decline in red bars, which hints at an easing selling pressure.

However, for the signals to switch to buying, the AUD/USD pair needs to clear the 20-day Simple Moving Average (SMA). Until this hurdle is overcome, it cannot be seen as a confirmed buying signal.