The AUD/USD exchange rate remains in a tight range ahead of the closely-watched Reserve Bank of Australia (RBA) interest rate decision. It was trading at 0.6423 on Friday, a level it has remained at in the past few weeks.
RBA interest rate decision
The AUD/USD pair changed a little after the Australian Bureau of Statistics (ABS) published encouraging job numbers. The economy created 89,000 jobs in April, a big increase from the median estimate of 20.9k and the previous month’s 36.4k.
More data showed that the unemployment rate remained unchanged at 4.1%, while the participation rate rose from 66.8% to 67.1% this month. This increase was much higher than the median estimate of 66.8%.
These numbers mean that the economy is doing well even as geopolitical risks remain. Still, analysts believe that the Reserve Bank of Australia (RBA) will deliver another interest rate cut next week. Economists polled by Reuters also expect another two rate cuts this year.
The most dovish analysts are from NAB Bank, who expect it to slash rates by 0.50%. In a statement to Reuters, the analysts said:
“Following tariff news at the start of April, we shifted our expectations. We’re expecting the cash rate to go to 3.35% now. That shift was really a rough lesson of a very changing, uncertain global environment where global growth was likely to slow.”
The RBA rate cut will be the second one in the current cycle. It slashed rates by 0.25% in February and maintained a neutral tone.
The bank has been concerned about inflation, which has remained elevated above its 2% target for a while. The most recent data showed that the headline CPI remained at 2.4% in the last quarter.
Federal Reserve cuts in question
The AUD/USD pair is also reacting to the recent truce between the United States and China. After a two-day meeting in Switzerland, the two countries reached a truce that led to a dramatic cut in interest rates.
The truce led analysts to lower their recession expectations, citing chances of improved trade dynamics.
However, what the Federal Reserve will do when it meets in June is unclear. Analysts expect that the bank will leave interest rates unchanged in this meeting and maintain its wait-and-see policy.
Polymarket traders place a 88% chance that the bank will not cut rates in this meeting. Odds of not cutting in July and September are 71% and 54%. Traders also anticipate that the bank will cut rates two times this year.
AUD/USD technical analysis
AUD/USD chart by TradingView
The daily chart shows that the AUD/USD exchange rate bottomed at 0.5910 in April and then bounced back to the current 0.6430. It has settled at the 50% Fibonacci Retracement level.
The pair has moved above the 50-day Exponential Moving Average (EMA), a highly bullish sign. It has also formed an ascending channel shown in black.
The AUD to USD pair has also formed an inverse head and shoulders pattern. Therefore, the most likely scenario is that it will cause a bullish breakout in the coming weeks. If this happens, the next point to watch will be the psychological point at 0.6600. A move below the 50-day moving average at 0.6357 will invalidate the bullish outlook.
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