Aussie falls on RBA’s dovish shift; Powell’s testimony in focus for fresh signals

Aussie dollar lost ground on Tuesday, after the Reserve Bank of Australia raised its cash rate by 25 basis points to the highest in more than a decade, in line with expectations, but tempered tone on unexpected dovish rhetoric in the statement following central bank’s policy meeting earlier today.
Markets were pricing for more hikes in coming months and expected terminal rate to rise above projected level.
The RBA surprised by calmer tones, suggesting that the tightening cycle, in which the central bank raised rate by 350 basis points in total, is likely near its end.
The policymakers changed their narrative by replacing phrase rate increases by further tightening, which suggests that one more hike might be enough, as high borrowing cost hurts consumer spending and economic growth.
However, the RBA is going to continue monitoring the situation, focusing on prices and wage-price relation and would act accordingly if situation deteriorates.

The AUDUSD pair accelerated lower after the RBA’s meeting, losing around 1% by early US session on Tuesday and hit new 2023 low, generating signal of bearish continuation on break below the floor of six-day congestion.
Fresh bears cracked pivotal Fibo support at 0.6663 (50% retracement of 0.6170/0.7157) close below which to add to bearish signals and further weaken near-term structure.
Firmly bearish daily technical studies contribute to bearish outlook, exposing next target at 0.6547 (Fibo 61.8% retracement).
Broken range floor at 0.6700 zone reverted to solid resistance, which should keep the upside protected and maintain bearish stance.

Markets shifted focus to the key event this week –  Fed Chair Powell’s testimony to the Congress, due today.
In his last comments, Powell was optimistic, highlighting that disinflationary process has already started, suggesting that the most from Fed’s tightening campaign has been seen, although leaving the door open for further action, as fight against inflation is not over.

Meanwhile, February US inflation report showed that price growth has picked up again and Powell’s view on his congressional testimony will show whether he will remain confident that the central bank is at the right path in curbing inflation and pushing it towards 2%, or monetary policy tightening should accelerate again.

Res: 0.6700; 0.6756; 0.6785; 0.6811
Sup: 0.6629; 0.6584; 0.6547; 0.6522