Australia: The Reserve Bank of Australia Raised the Interest Rate from 2.85% to 3.10% Similar to Expectations

Summary:

Eyes and Ears earlier today on the Reserve Bank of Australia interest rate decision that was released on December 6th, 2022. The RBA meeting earlier led to an increase of 25 bp in interest rates where traders, central banks, and governments are watching what will the rest of the central banks will do regarding rate increases in the upcoming meetings.

BUY AUDUSD

Close Time

CLOSED

0.67420

Entry Price

0.67800

0.66900

0.71825 +0.00208 +0.29%

38.0

Pips

Profit

0.66900

0.67801

Exit Price

0.67420

Entry Price

0.67800

Fundamentals

In today’s article, we will discuss the effect of the three different options of a rate increase. To start with, it is important to know that the RBA is increasing the interest rate to fight inflation. While this might be a short-term solution for inflation, it will have a massive effect on the market in the future, and a recession is expected. As a rule of thumb, a higher-than-expected rate is bullish for the AUD, and a lower-than-expected result is bearish for the AUD.

What could have happened if the RBA did not increase the rate by 25 bp?

A lower-than-expected interest rate decision will lead to a weaker AUD versus major currencies.

What could have happened if the RBA increase the rate by more than 25 bp?

A more-than-expected rate decision is considered bullish for the AUD, and it will gain momentum versus other major currencies.

What did happen?

The RBA decided to increase the interest rate by 25 bp as expectations. In this case, the market will not move a lot as this result was already expected and took effect on the market when it first was announced, that’s why no major effect on the AUDUSD pair was monitored.

Technical Analysis

AUDUSD Intraday Chart

Australia: The Reserve Bank of Australia Raised the Interest Rate from 2.85% to 3.10% Similar to Expectations_1

The Intraday AUDUSD Chart shows a bullish engulfing pattern with possible prices touching the 0.67800 level later today.

Support and resistance:

0.6722

0.6713

0.6708

Pivot: 0.6728

0.6751

0.6743

0.6737

Trading Recommendations

High Probability Scenario:

Long Above: 0.6740

Target 1: 0.6755

Target 2: 0.6780

Alternative Scenario:

Short Below: 0.6715

Target 1: 0.6703

Target 2: 0.6690

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