"RBA's Rate Hike Sends Australian Dollar Below $0.645: Bearish Signals for AUDNZD"

Warren's Trading Titans

The Australian dollar (AUD) experienced a decline, falling below $0.645, after the Reserve Bank of Australia (RBA) raised the cash rate to 4.35% in November. This decision was influenced by persistent inflation and predictions of higher consumer inflation. The article explores the implications of this rate hike on the AUDNZD pair, indicating a bearish outlook for the currency pair.

The RBA's decision to raise interest rates was expected, but it had a significant impact on the Australian dollar, pushing it below the $0.645 level. The move was in response to unexpectedly high inflation, with third-quarter inflation figures surpassing expectations. This has led to forecasts of consumer inflation reaching 3.5% by the end of 2024, exceeding the RBA's target range of 2-3% by the end of 2025.

The RBA's commitment to data-driven policy decisions and vigilance in monitoring economic risks is evident. However, an interesting contrast arises from the Melbourne Institute's Monthly Inflation Gauge, which recorded a 0.1% drop in prices in October, the first decline in fourteen months. This data adds to the uncertainty in the Australian economic landscape.

The focus then shifts to the currency market, particularly the AUDNZD pair, which appears to be influenced by these developments. A bearish divergence is observed on the 4-hour timeframe, indicating the potential for a downward trend in the pair. Traders are presented with a trade setup with an entry point at 1.085, triggered by the breakout of the last significant higher low (HL). Effective risk management includes a stop loss (SL) set at 1.095 based on the last higher high (HH). The take profit (TP1) is placed at 1.065, offering an attractive 1:9 risk-reward ratio, potentially leading to substantial gains for traders. This trade aligns with a broken trendline on the 4-hour timeframe, reinforcing the bearish outlook.

Traders are advised to closely monitor this trade, considering ongoing economic developments and their potential impact on the AUDNZD pair. The RBA's data-driven approach and evolving inflation scenario are factors that could significantly influence the currency pair in the coming months.

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Last updated: 11/08/2023 05:36

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