- The Reserve Bank of Australia kept interest rates unchanged.
- Australia’s underlying inflation remains high at 3.5%.
- The dollar was vulnerable on the day of the US election.
The AUD/USD price analysis indicates renewed bullish sentiment after hawkish remarks at the Reserve Bank of Australia policy meeting. Meanwhile, the dollar pulled back as bets supported a Harris win in the US presidential election.
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The Reserve Bank of Australia kept interest rates unchanged on Tuesday, noting that inflation remained too high. Moreover, Australia’s central bank warned that interest rates might stay high for longer.
Notably, the labor market has remained resilient despite high rates. Meanwhile, inflation eased in the third quarter to 2.8%. However, underlying inflation remained high at 3.5%, keeping policymakers cautious. At the same time, market participants are only fully pricing a rate cut in May next year. After the meeting, the Australian dollar rose.
On the other hand, the dollar was vulnerable on the day of the US election as bets showed Kamala in a stronger position. Consequently, traders unwound the Trump trade. There was a time when Trump was always in the lead in betting sites. This supported the dollar as his policies create a hawkish outlook for Fed policy.
Trump has proposed increased tariffs, among other changes that would increase inflation. Meanwhile, experts believe Kamal would likely continue with most of Biden’s policies. In this case, the Fed would continue its rate-cutting cycle, weighing on the dollar.
The Federal Reserve will meet soon after the election, and markets expect a 25-bps rate cut. However, they will focus more on the messaging on future policy moves.
AUD/USD key events today
- US ISM services PMI
- US presidential election
- US congressional elections
AUD/USD technical price analysis: Trend reverses after bullish engulfing candle
On the technical side, the AUD/USD price is climbing after reversing near the 0.6550 support level. The price sits above the 30-SMA, showing bulls are in the lead. At the same time, the RSI has broken above 50 to support solid bullish momentum.
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Bulls strengthened enough to take control near the 0.6550 level. Here, the price made a bullish engulfing candle, signaling stronger momentum. Soon after, the price broke above the 30-SMA, confirming a reversal. Currently, bulls are eying the 0.6650 resistance level. If the price breaks above this level, it will likely reach the 0.6700 resistance.
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