Bearish reversal pattern in AUD/USD, as RBA gives dovish signals

AUD/USD turned bearish in April and it broke below the moving averages on the daily chart, immediately turned into resistance and they did a great job of keeping the buyers in check, killing their hopes after every decent retracement to the upside. The 50 SMA (yellow) took its turn in September and it looks like this moving average is doing it again, as price begins to reverse today after the bullish momentum that started last Friday.

AUD/USD Daily Chart – The 50 SMA again rejects the price

Stochastic indicator is overbought and reversing

Although yesterday the 50 SMA rejected the price and the daily candlestick closed in the doji, which is a bearish reversal signal after the bullish move. Today sentiment turned negative and equity markets opened lower after three strong days, so risky currencies such as the commodity dollars are also reversing lower. We opened a long-term forex sell signal earlier here below the 50 SMA, so we are bearish on this pair in the near future.

Remarks by RBA Deputy Governor Michelle Bullock

  • More rate hikes will be needed
  • We have already raised rates aggressively
  • Size and timing of rate hikes will depend on data
  • Inflation is too high, getting wider
  • Good reasons to think that we are approaching the peak of inflation this cycle

Well you have to walk the walk and not only talk the conversation. The RBA’s latest move here to simply raise the cash rate by 25 basis points is not very convincing and suggests that the central bank may be approaching the latter stages of its tightening cycle.

She mentions that the central bank could have a “scorched earth” interest rate policy to control inflation, but that would not be the best outcome. As for their next steps, she maintains that they have flexibility because they “would raise rates faster if we thought inflation was not coming down as expected.” Right.

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