AUD/USD Forecast: Upside limited after being unable to hold above 0.6700

AUD/USD Current Price: 0.6664

• RBA unexpectedly hikes rates by 25 basis points, focus shifts to the Fed. 
• Aussie outperforms after RBA surprise but lags during the American session. 
• AUD/USD shows mixed signs after retreating in American hours.

On Tuesday, the AUD/USD pair climbed higher due to the unexpected decision from the Reserve Bank of Australia (RBA). However, as market sentiment worsened during the American session, the pair fell back from its weekly high below 0.6700.

The RBA increased the key interest rate by 25 basis points to 3.85%, surprising market participants who had expected no change. This move caused the Aussie to surge across the board, with AUD/USD hitting its highest level since April 21 at 0.6716. RBA's statement suggested that rates could continue to rise, and Governor Philip Lowe said they will do what is necessary to bring inflation back to target. The Statement on Monetary Policy on Friday will offer more clues about the future. 

However, the AUD/USD pair pulled back later as the Greenback regained momentum amid risk aversion, despite the decline in US yields. The Aussie lagged during the American session and AUD/NZD, which had surged to 1.0830, dropped back to 1.0735, the level it had before the RBA decision.

Looking ahead, on Wednesday, Australia will report its March Retail Sales with a 0.2% expected gain, along with the AiG Manufacturing for March and the S&P Global Services PMI for April. Additionally, the New Zealand Q1 Employment report will be relevant. In the US, the focus will be on the Federal Reserve's decision. The ADP private payroll numbers and the S&P Global Services PMI are also due. 

Considering the relevance of the economic reports ahead, the FOMC decision, the RBA statement, and NFP, markets will likely remain busy, setting the stage for high volatility.

AUD/USD short-term technical outlook

The failure of AUD/USD to hold above 0.6700 suggests that the pair is not yet ready for a major rally. However, it did improve the outlook in the short term after breaking above the 0.6645/50 area, which has now become immediate support. Technical indicators are currently favoring a bullish outlook but without much conviction. If AUD/USD manages to reclaim 0.6700, it would strengthen the outlook for the bulls, opening the doors to 0.6750.

On the daily chart, the situation is less favorable for the bulls as the price failed to hold above the 20-period Simple Moving Average (SMA) at 0.6680. The price is currently below key SMAs, and technical indicators are moving around midlines with a slightly upward slope.

Support levels: 0.6645 0.6620 0.6580

Resistance levels: 0.6680 0.6705 0.6740

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