Australian Dollar shows weakness after RBNZ cut

• AUD/USD shows a decrease, dropping to 0.6615.
• RBA maintains its hawkish position, potentially balancing the downside.
• RBNZ’s dovish posture dragged down the Aussie as well as the Kiwi on Wednesday.

The AUD/USD pair experienced a decrease of 0.30% during Wednesday's session, settling near 0.6615, after the dovish Reserve Bank of New Zealand (RBNZ) decision. In addition, potential decline in demand for Australian exports due to the slowdown in the Chinese may negatively impact the AUD. However, the hawkish stance of the Reserve Bank of Australia (RBA), paired with mixed Australian economic data, can potentially temper the downside.

Despite the mixed Australian economic outlook and high inflation, the RBA's consistent hawkish position only strengthens predictions for 25 bps of easing for 2024.

Daily digest market movers: Aussie under some pressure amid RBNZ decision, China's concerns

• The pair's descent on Wednesday came despite further US Dollar losses, as a result of falling copper and iron ore futures. Worsening credit data from China, coupled with the country's weakened demand and substantial commodity supply, has negatively impacted markets.
• In addition, the RBNZ unexpectedly cut interest rates by 25 basis points this morning and also revealed that a 50-basis-point cut had been seriously considered, which dragged down both the Kiwi and the Aussie.
• However, investor confidence in the Australian Dollar was recently bolstered by the RBA's decision to maintain the official cash rate (OCR) at 4.35%. Its cautious view, along with predictions of sustained domestic inflation, suggests that both trimmed-mean and headline CPI inflation are now expected to meet the mid-point of the 2-3% range by late 2026, later than the earlier prediction of June 2026.
• In that sense, among the G10 central banks, RBA is anticipated to be the last to initiate interest rate cuts. In contrast, the Federal Reserve (Fed) is expected to facilitate easing in the near future, and this contrast may support AUD/USD in the coming months.

AUD/USD technical outlook: AUD/USD buyers breathe, outlook still promising

The AUD/USD pair currently displays a moderate bullish sentiment, with the Relative Strength Index (RSI) remaining fairly neutral around the 50 region, while the Moving Average Convergence Divergence (MACD) shows green bars.

Key support lies at 0.6600 and 0.6580, while resistance is observed around the 0.6640 area. Testing of these key levels is crucial for determining the pair's future direction.