The AUD/USD currency pair traded 0.5% higher to near 0.7015 during the early European trading session on Monday, rebounding after a sharp two-day sell-off. The Australian Dollar (AUD) outperformed its major currency peers, particularly the Swiss Franc, amid expectations that the Reserve Bank of Australia (RBA) will raise interest rates at its monetary policy meeting on Tuesday [1]. The heat map of currency movements showed the AUD gaining 0.49% against the USD, 0.39% against the EUR, 0.41% against the GBP, and 0.58% against the CHF, highlighting broad strength across major currencies [1].
Market participants anticipate the RBA will increase its Official Cash Rate (OCR) by 25 basis points to 4.1%, following a previous 25 bps hike to 3.85% in February. The RBA has kept the door open for further rate hikes, citing upside inflation risks, which have been exacerbated by surging oil prices. These price increases are attributed to the closure of the Strait of Hormuz amid ongoing conflicts in the Middle East involving the United States, Israel, and Iran [1].
Meanwhile, the US Dollar (USD) retraced slightly after a strong rally ahead of the Federal Reserve’s (Fed) monetary policy announcement scheduled for Wednesday. The Fed is expected to leave interest rates unchanged in the current range of 3.50%-3.75% [1].
From a technical perspective, AUD/USD trades near 0.7015, with a neutral near-term bias as the spot rate remains close to the flattened 20-day Exponential Moving Average (EMA) at around 0.7053. The 14-day Relative Strength Index (RSI) is in the 40.00-60.00 range, indicating that momentum has cooled from prior overbought readings [1].
CONCLUSION
The AUD/USD pair has rebounded on expectations of a hawkish RBA rate hike, supported by broad strength in the Australian Dollar and rising inflation concerns. Technical indicators suggest a neutral bias, with momentum cooling from previous highs. The upcoming RBA and Fed policy decisions are likely to be key drivers for further market movement.