AUDUSD PLUNGE CONTINUES DESPITE HAWKISH RBA DECISION

The Australian dollar declined sharply on Tuesday even after the latest interest rate decision by the Reserve Bank of Australia (RBA). The bank decided to hike interest rates by 0.50%, bringing the official cash rate to 1.85%. It has raised rates four times this year, making it the most hawkish that the bank has been in over 30 years. The Aussie declined after the bank decided to downgrade its forward guidance for the economy. It expects that the economy will grow by 3.25% in 2022 compared with the previous estimate of 4.25%. As such, there is a likelihood that the RBA will slow its rate hikes this year. Data published earlier showed that Australia’s building approvals dropped by -0.7% while home loans fell by 3.3% in June.

Global stocks declined as investors watched the growing risks between the United States and China. Nancy Pelosi, the US Speaker will travel to Taiwan. In a show of force, Chinese military jets flew close to Taiwan as rhetoric between the two countries. In Europe, the DAX and CAC 40 indices declined by more than 0.40%. Similarly, in the US, futures tied to the Dow Jones and S&P 500 declined by more than 0.50%. Meanwhile, companies will continue publishing their results later today. Some of the most notable ones to watch will be PayPal, Match Group, Airbnb, and Occidental Petroleum. Stocks will also react to the latest statements by Charles Evans and Charles Bullard who are Fed officials.

The British pound declined on Tuesday as the US dollar strength resumed. Sterling dropped after the latest UK home sales data. According to Nationwide, the country’s home prices rose at an annual rate of 11%. This increase was slightly up from the previous 10.7%. As a result, the average house price rose to 271,200 pounds, which is about 55,000 pounds above where it was before Covid-19. The next key catalyst for sterling will be the upcoming US JOLTs job vacancies data and the interest rate decision by the Bank of England.

AUDUSD

The AUDUSD pair dropped to a low of 0.6925, the lowest level since Friday. It managed to move below the lower side of the Bollinger Bands while the Relative Strength Index (RSI) has pointed downwards. The pair has dropped below the 25-day and 50-day moving averages. The Average Directional Index (ADX) has pointed upwards. Therefore, the pair will likely continue falling as sellers target the next key support at 0.6850.

EURUSD

The EURUSD pair dropped to a low of 1.0235, lower than this week’s high of 1.0290. It has formed a break and retest pattern by moving above the descending channel shown in yellow. It has moved to the middle line of the Bollinger Bands. The Stochastic Oscillator moved below the overbought level. The pair will likely resume the bullish trend during the American session.

USDJPY

The USDJPY pair dropped to a two-month low of 130.41 as the Japanese yen continued bouncing back. The pair has moved to the lower side of the Bollinger Bands. It is below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the oversold level. Therefore, the pair will likely continue falling during the American session.