- AUD/USD returns to the red, shaving off RBA surprise-led solid gains.
- RBA delivered a bold 50 bps rate hike in a strong move to rein in inflation.
- 200-DMA caps the upside amid risk-aversion and the dollar’s strength.
AUD/USD has entered a phase of consolidation below 0.7200 in the European session after witnessing good two-way businesses earlier in the Asian session.
The aussie wiped out the early Asian losses and jolted higher after the Reserve Bank of Australia (RBA) delivered a major surprise by hiking the key rates by 0.50% to 0.85% at its June monetary policy meeting, outpacing the market consensus of a 0.25% to 0.40% rate lift-off.
The bold move by the RBA was seen as pre-emptive to rein in inflation. Bulls, however, quickly faded the uptick, as risk-off flows seeped back on worries that the aggressive monetary policy by global central banks could stunt economic growth. The safe-haven US dollar found fresh demand, adding to the weight on the aussie.
The greenback remains broadly underpinned, preserving its Monday’s gains even though the US Treasury yields pull back, as the government bonds are sought out by investors in times of adverse market conditions.
The pair remains tied down to risk trends and the dollar price action amid a lack of significant US economic news later this Tuesday.
From a short-term technical perspective, AUD/USD met resistance once again at the critical horizontal 200-Daily Moving Averages (DMA) at 0.7256.
While testing the 200-DMA, the aussie pierced through the 50 and 100 DMAs around 0.7220. With the bear cross in play, however, sellers returned and moved the rates back below the 0.7200 level.
For bulls to take on the upside again, they need to clear the abovementioned critical barriers.
The 14-day Relative Strength Index (RSI) is flatlined above the midline, keeping bulls hopeful.
AUD/USD: Daily chart
Alternatively, a sustained break below the 0.7150 psychological level is needed to extend the pullback towards the 0.7100 round figure.
The upward-sloping 21-DMA at 0.7080 could be the last line of defense for aussie buyers.