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In June, the Reserve Bank of Australia (RBA) surprised markets with a decision to hike rates by 25bps, taking the Australian cash rate to 4.10%. This was decided on the basis that further increases were required to provide greater confidence that inflation would return to the target range within a reasonable timeframe. This decision led to the AUDUSD climbing steadily from the 0.6650 price level up toward the 0.69 round number resistance area.
Currently, the AUDUSD is trading along the 0.6670 price level, just below the 23.60% Fibonacci retracement level, in the lead-up to the RBA decision on 4th July. While markets anticipate that the RBA could hold rates at 4.10%, given that the consumer price index (CPI) has fallen significantly from 6.8% to 5.6%, another surprise hike from the RBA could still be possible as inflation is still well above the target range.
As the AUDUSD found relative support along the 0.6595 price level and with the Relative Strength Index (RSI) trending to the upside, a decision from the RBA to hike rates to 4.35% could lead the AUDUSD to climb steadily toward the immediate resistance level of 0.69. Watch for the price to break above the 0.67 round number level, to signal a confirmation of the upside, with the 0.68 price level coinciding with the 61.8% Fibonacci retracement level providing brief resistance on the path up to the 0.69 resistance area.
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