Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on the potential RBA rate path after the US-China trade war truce, stating:
“Following the US/China 90 day tariff cuts money market expectations have fallen back to around 3.3 more 0.25% RBA rate cuts this year (down from around 5 back in early April), but with a 0.25% cut 99% priced in for next week.”
AUD/USD: Key Scenarios to Watch
- Bearish Aussie dollar Scenario: Renewed US-China tensions, rising Aussie unemployment, or dovish RBA cues may send AUD/USD below the 200-day EMA toward the $0.63623 support level and the 50-day EMA.
- Bullish Aussie dollar Scenario: Upbeat trade developments, Beijing stimulus, falling Aussie unemployment, or hawkish RBA guidance could drive the pair above the May 7 high of $0.65144.
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Later today, Fed speakers may influence cross-currency rate dynamics. Hawkish Fed cues, signaling a near-term hold on policy moves, could widen the rate differential in favor of the US dollar, sending the AUD/USD pair below the 200-day EMA toward the 0.63623 support level and the 50-day EMA.
However, rising support for a June Fed rate cut may narrow the rate differential, favoring the Aussie dollar. A more dovish Fed stance could drive AUD/USD toward $0.65144.