- Philip Lowe insists that higher interest rates will bring back a balance between demand and supply.
- Markets expect RBA rates to get to 3.5% by year’s end.
- Australia’s government plans to review the RBA.
Today’s AUD/USD forecast is bullish as investors react to hawkish statements from Reserve Bank of Australia Governor Philip Lowe. He said the current interest rates might double by the time the central bank is through with the war on the damaging inflationary cycle in Australia.
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“For inflation to return to the 2%–3% target range, a more sustainable balance between demand and supply is needed. Higher interest rates will help achieve this,” Lowe said in a speech at a business conference in Melbourne.
Markets expect the Reserve Bank of Australia to hike rates to nearly 3.5% by the end of the year. At the same time, the central bank is facing criticism from the newly elected Labor government, which is planning a review to look into the bank’s board structure, operations, and methods of communication with the public.
“The terms of reference are appropriate, and the government has appointed a first-class panel,” Lowe said. “It is an opportunity to take stock of our monetary policy arrangements and make sure that they are fit for purpose for the challenges ahead.”
AUD/USD key events today
Investors do not expect any significant economic news releases from Australia. However, the United States will release an existing home sales report showing the change in the annualized number of residential buildings sold in the last month. The report will give a better idea of the housing market and US economic strength.
AUD/USD technical forecast: Break above 0.68304 bodes well for the bulls.
The 4-hour chart shows the price edging higher after a solid bullish close yesterday. It is trading well above the 30-SMA in a steep move up, and the RSI trades above 50, supporting bullish momentum. The price broke above the July 5 resistance at 0.68304 and might retest this level before going higher.
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The pair is in a strong uptrend, and soon, it might get to the next resistance level at 0.69581, which acted as resistance back on June 28. However, bears may come in at the overbought region and cause a retracement to the 30-SMA. If the price stays above the SMA and the RSI stays above 50, the bias will remain bullish.
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