18 February 2025

RBA rate cut is not hindrance to AUDUSD strengthening

The AUDUSD currency pair is confidently recovering after updating the minimum of 2020 in early February. Quotes have recovered the decline of the last 2 months and are now consolidating above the important level of 0.63. If the buyers of the Australian dollar against the US currency do not face significant resistance from the bears at the current levels, their target will shift to the level of 0.643. Today’s decision of the Reserve Bank of Australia (RBA) is not a major hindrance to this scenario. 


Australian officials have started the cycle of interest rate cuts after all. Although the RBA was the last of the developed country central banks to start monetary policy easing, the Australian bank is unlikely to be eager to catch up with its peers. Governor of the Reserve Bank Michele Bullock emphasized the persistently high inflation rate, which is not predicted to fall below 2.7% until mid-2027. In this regard, analysts polled by Reuters expect no more than 2 additional cuts of the RBA key rate by the end of this year.


According to RBC Capital Markets, even with the easing of monetary policy in Australia, the national currency has the potential to strengthen further. The company’s specialists forecast the AUDUSD pair at the level of 0.645. Alvin Tan, head of currency strategy at RBC Capital Markets, cites the unrealized fears of the worst-case scenario of the US import duties. Tariffs on Australian aluminum will have little impact on the earnings of the country’s companies.


Australia & New Zealand Banking Group’s Mayank Navalakha also highlights overly negative estimates of the AUDUSD pair by traders. The short position on the Australian currency exceeded 44 thousand contracts last week. If the US dollar does not get new growth drivers, the market will be looking for more profitable options, which may include the Australian currency.


Despite the two-week growth of AUDUSD, the RSI has not yet entered the overbought area. With no correction signal, the price may continue to climb towards 0.643.



Consider the following trading strategy:


Buy AUDUSD at the current price. Take profit – 0.643. Stop loss – 0.63.

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