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CFDs are complex instruments. 72% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

RBA Meeting Minutes Preview and what comes next for the AUD/USD?

The RBA Board meeting minutes are expected to reiterate the hawkish sentiments from the June meeting, providing support for the resurgent AUD/USD.

AUD Source: Bloomberg

The Minutes from the Reserve Banks meeting in June are scheduled to be released Tuesday, June 20, at 11.30 am. At the meeting, the Reserve Bank of Australia (RBA) surprised the market by raising the cash rate by 25 basis point (bp) from 3.85% to 4.10%.

Choosing to look through softer labour market and retail sales data in May, the RBA focused on elevated inflation, rising unit labour costs, wages, and poor productivity.

“While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas. Unit labour costs are also rising briskly, with productivity growth remaining subdued.”

The RBA retained its tightening bias and noted that a further tightening of “monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve."

The Board meeting minutes are expected to reiterate the hawkish sentiments outlined above and will be closely scrutinised for more background behind last month’s rate hike, clues around how high rates might go and what factors might see the RBA pause its rate hiking cycle.

Following last week’s red-hot Australian Labour Force report, the interest rate market is currently pricing in a 50% chance of a 25 bp rate hike at the RBA’s July meeting, which would take the cash rate to 4.35%. For the record, we think the RBA will hike rates by 25bp in July and again in August, taking the cash rate to 4.6%.

RBA Cash Rate Source: RBA
RBA Cash Rate Source: RBA

AUD/USD Technicals

The AUD/USD stormed higher last week at .6887 (+2.01%), supported by a trifecta of tailwinds - a Federal Reserve (Fed) pause, a red-hot AU labour force report and rate cuts/stimulus in China.

The AUD/USD’s break above 16-week range highs .6820/30 puts .7000c and then the YTD Feb .7157 high on the market’s radar.

We expect buyers to operate on dips towards .6820, leaning against support formerly resistance .6800/70ish.

AUD/USD chart Source: TradingView
AUD/USD chart Source: TradingView

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