After falling below 0.6400 in the Tokyo session, the AUD/USD pair rapidly recovered. After a healthy decrease, the upward movement is still a pullback and shouldn’t be viewed as a turnaround.
With a test back through 0.64 on Friday, the AUD/USD corrected from a crucial point on the charts, but the correction hardly made a dent in the downtrend that will likely continue during the first part of the week and ahead of the Reserve Bank of Australia’s announcement.
The Board stated in the RBA Sep minutes that it could be acceptable “at some point” to pull down to 25bps raises, but we believe it is too soon. According to TD Securities experts, the overall strength of the data indicates that the economy is doing well.
The Governor observes that the current cash rate is “still probably on the low side,” so this gives the RBA room to front-load hikes even more.
According to Rabobank analysts, Australian GDP is expected to weaken domestically going forward.
RBA officials noted that growth will be 3.14 per cent over 2022, supported by rising consumption as well as a rebound in investment and service exports. Following that, growth is anticipated to decline to about 13.5 per cent in both 2023 and 2024. Compared to the Eurozone, the UK, and the US, all of which are at risk of going into recession next year, this outlook is favourable.
Conclusion
An adjustment to 0.69 on the strength of the dollar. On a six-month horizon, there is potential for the AUD/USD to reclaim the 0.71 level.