AUD/USD pares post-RBA’s gains slides below 0.7200 ahead of Friday’s US CPI data

• The Australian dollar extends its losses vs. the greenback, down by 0.12%.
• The RBA’s unexpected 0.50% rate hike lifted the major; a negative sentiment erased the AUD/USD gains.
• Investors’ focus turns to the US CPI and UoM Consumer Sentiment data.
• AUD/USD Price Forecast: A daily close below 0.7200 might send the pair tumbling towards 0.7100.

The AUD/USD trims some of its Tuesday’s gains after the Reserve Bank of Australia (RBA) surprisingly hiked rates by 50 bps. Nevertheless, investors’ negative sentiment is weighing on high beta currencies, like the Australian dollar, with the major drifting below the 100-day moving average (DMA). At 0.7199, the AUD/USD is 30 pips short of the latter in the North American session.

The Australian dollar edges down despite RBA’s rate hike

Recapping the RBA decision, the central bank said that inflation is higher than expected, that the labor market is tight, and that the economy is solid. According to the RBA, it was necessary to reduce the monetary stimulus introduced when the Covid-19 global pandemic hit and emphasized the need for additional rate increases over the following months.

Analysts at Commerzbank wrote that the “RBA’s restrictive approach should support AUD, but as long as the economic development in China remains unclear, AUD gains are likely to remain limited.”

In the meantime, European equities ended Wednesday’s session with losses, while US equities remain in the red. Higher US Treasury yields weigh on stocks and underpin the greenback. The US 10-year Treasury yield sits at 3.007%, up almost three basis points, while the US Dollar Index, a measure of the buck’s value against a basket of rivals, edges up by 0.10%, at 102.436.

The factors mentioned above weighed on the AUD/USD, which failed to sustain the rally provided by the RBA’s hike. On Wednesday, the AUD/USD retreated from daily highs at around 0.7234 and is back below the 0.7200 figure, a reflection of a risk-off mood.  

Elsewhere, the OECD is the following international organization that shrank the expectations for a higher global economic growth rate. By 2022, the OECD estimates growth at 3.0%, lower than the 4.5% estimated, and by 2023, it will hit 2.8% YoY, less than the 3.2% foreseen.

In the week ahead, the US calendar will feature Initial Jobless Claims for the week ending on June 4, followed by consumer inflation data, alongside the University of Michigan’s Consumer Sentiment.

AUD/USD Price Forecast: Technical outlook

During the day, the AUD/USD broke below the 100-DMA at 0.7228 and edged towards the 50-DMA at 0.7208. At the time of writing, selling pressure on the AUD/USD tumbled the pair below 0.7200. At the same time, the Relative Strength Index (RSI) is aiming downwards, and albeit in a bullish territory at 54.28, its slope signals weak demand on the pair.

Therefore, the AUD/USD would resume its downtrend. That said, the major’s first support would be the June 7 low at 0.7157. Break below would expose the June 2 daily low at 0.7140, followed by the May 27 daily low at 0.7089.