AUD/USD Defends January Low Ahead of RBA Rate Decision

After announcing consecutive nine rate increases so far, the Reserve Bank of Australia (RBA) is up for another hawkish monetary policy outcome, despite teasing the policy pivot of late, during the scheduled Interest Rate Decision of around 03:30 AM GMT on Tuesday.

The RBA is expected to carry out the slow and steady interest rate hike by lifting the benchmark interest rate by 25 basis points (bps) to 3.60%, the fourth such move in a row, during Tuesdays Interest Rate Decision.

AUD/USD

The Australian dollar is under pressure at the start of the new trading week. AUD/USD is trading at 0.6735 in Europe, down 0.50%. While as of yesterday it trades in a narrow range after struggling to push back above the 200-Day SMA, and the Reserve Bank of Australia rate decision may keep the exchange rate afloat as the central bank is expected to implement higher interest rates.

AUD/USD appears to be defending the January low as it holds within last weeks range, and the exchange rate may stage further attempts to trade back above the long-term moving average as the RBA continues to carry out its hiking-cycle.

The RBA is anticipated to raise the official cash rate by another 25bp in March as the central bank insists that further increases in interest rates are likely to be needed over the months ahead, and the central bank may pursue a more restrictive policy as the recent inflation data had suggested more breadth and persistence in inflation than had been expected.

The RBA may adjust the forward guidance for monetary policy as inflation was likely to have reached its peak in the December quarter, and Governor Philip Lowe and CO. may look to switch gears over the coming months as the forecasts for output and inflation had been prepared on the technical assumption of the cash rate reaching around 3.3per cent.

Having said that, a 25bp RBA rat hike along with a hawkish forward guidance may generate a bullish reaction in the Australian Dollar, but the exchange rate may struggle to defend the January low if the central bank plans to conclude its hiking-cycle in the months ahead.

AUD/USD trades in a narrow range as it holds above the January low 0.6688, with a push above the 200-day SMA raising the scope for a move towards the 0.6820 to 0.6870 region.

Nevertheless, AUD/USD may threaten the opening range for 2023 as it struggles to push above the moving average, with a move below January low opening up the 0.6600 handle. But Failure to defend the yearly opening range may push the Relative Strength Index towards oversold territory, and a move below 30 in the oscillator is likely to be accompanied by a near-term decline in AUD/USD like the price action seen last year.