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AUD/USD Forex Signal: Bearish Sentiment Amid RBA Pivot – 05 October 2022

The AUD/USD pair will likely have a bearish breakout as bears target the next key support level at 0.6380.

Bearish view

Sell the AUD/AUD pair and set a take-profit at 0.6350.Add a stop-loss at 0.6550.Timeline: 1 day.

Bullish view

Set a buy-stop at 0.6510 and a take-profit at 0.6650.Add a stop-loss at 0.6450.

The AUD/USD price moved sideways on Tuesday and Wednesday morning as the market reflected on the latest interest rate decision by the Reserve Bank of Australia (RBA). The pair was trading at 0.6472, which was slightly below Tuesday’s high of 0.6558.


RBA starts to pivot

The RBA concluded its two-day meeting on Tuesday and delivered its verdict. It continued with its tightening process, albeit at a slower pace than expected. Precisely, the bank decided to hike interest rates from 2.35% to 2.60%, which was lower than the expected 2.85% increase.

Analysts now expect that the bank will continue slowing its rate hike plan as it faces the tough balancing act between slowing inflation and preventing a recession. Most economists now expect that the bank will hike rates to 3.0% by end of the year, down from the previous estimate of 3.3%.

Some analysts believe that the bank erred by starting to pivot. They note that inflation will continue rising while the unemployment rate has crashed to the lowest level in 48 years. At the same time, consumer spending was still vibrant, meaning that the bank has room for more tightening.

Still, some believe that the cautious tone was warranted since the bank has already hiked too fast too soon. It has already hiked the official cash rate by 250 basis points in five months. Analysts at ANZ said that the bank will likely push rates to above 3% in the coming months or early in 2023.

The AUD/USD price wavered after the latest American factory order and JOLT job openings data. Factory orders improved from – 1.0% in July to 0.0% in August. This increase was lower than the median estimate of 0.2%. Job openings dropped from 11.17 million to 10.0 million in August.

AUD/USD forecast

The AUD/USD pair moved sideways in the overnight session as the market continued focusing on the latest RBA interest rate decision. It has moved slightly below the 25-day and 50-day moving averages while the Bollinger Bands are moving sideways.

The Relative Strength Index (RSI) has moved to the neutral level of 50. It has also formed a symmetrical triangle pattern. Therefore, the pair will likely have a bearish breakout as bears target the next key support level at 0.6380. The stop-loss for this trade will be at 0.6545.

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