The Australian dollar (AUD/USD) edged higher by 0.25% on Tuesday, settling close to 0.7185 after finding support around 0.7150 during the European session, following the Reserve Bank of Australia's (RBA) decision to hike the cash rate by 25 basis points from 4.10% to 4.35% [1]. The RBA cited persistent inflation pressures and stronger-than-expected private demand growth as reasons for the rate increase, and signaled a data-dependent approach for future moves, noting that capacity pressures had re-emerged [1].
Despite the rate hike, gains in AUD/USD remained limited, with price action reflecting market indecision as traders digested the RBA decision. The pair has been trading in a narrow range with overlapping wicks and small-bodied candles, indicating uncertainty [1]. Technical analysis shows AUD/USD holding a modest bullish intraday bias above the daily open at 0.7169, with the Stochastic RSI reading around 9.49 in oversold territory, suggesting waning downside momentum after recent consolidation [1]. On the daily chart, the pair remains above both the 50-day EMA at 0.7066 and the 200-day EMA at 0.6823, indicating a broader uptrend, while the Stochastic RSI near 50.8 signals neutral momentum and potential consolidation [1].
On the US Dollar side, crude oil prices remained elevated due to the ongoing closure of the Strait of Hormuz, which has lasted for three months without a firm ceasefire timeline from diplomatic talks. The ISM Services PMI came in at 53.6, just below consensus, while JOLTS job openings exceeded expectations at 6.87 million. The upcoming US Non-Farm Payrolls (NFP) release, with consensus pointing to a soft 60,000 print after the previous month's 178,000, is expected to set the tone for the US Dollar into next week [1].
Looking ahead, Australian trade data due on Thursday and Chinese trade figures over the weekend are expected to provide further insight into external demand, which could influence AUD/USD movement [1].
CONCLUSION
The RBA's 25 basis point rate hike provided modest support to AUD/USD, but gains were limited as traders remained cautious and price action reflected ongoing indecision. With the pair holding above key technical levels, upcoming economic data from Australia, China, and the US will be closely watched for further direction.