The AUD/USD tilted lower after the relatively strong Australian house price index and business confidence data. The pair also reacted to a statement by Philip Lowe, the Reserve Bank of Australia (RBA) governor. It is trading at 0.7356, which was slightly below last week’s high of 0.7410.
Philip Lowe on rate hikes
The AUD/USD reacted to a speech by Philip Lowe, in which he predicted that the RBA would start reviewing its tapering policies in February next year.
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He also challenged market expectations for a rate hike before 2024. While the bank remains confident about a strong economic rebound, it expects that the Delta wave will lead to a 2% contraction in the third quarter. The market is pricing in the first rate hike in 2022.
In the speech, he also addressed the recent jump in home prices. He made it clear that the bank will not use monetary tools to address these challenges. Instead, he recommended that the government, through its fiscal and regulatory measures handle them.
Home prices in Australia are expected to grow by 20% this year. Indeed, a report published earlier today showed that the country’s home prices jumped from 5.4% in the first quarter to 6.7% in the second quarter. This growth has been attributed to the ongoing wave of low-interest rates, higher demand from foreigners, and large savings by Australians who have not travelled in almost 2 years. He said:
“While monetary policy is contributing to higher housing prices at the moment, the way to address these concerns is through the structural factors that influence the value of the land upon which our dwellings are built.”
The AUD/USD pair will react to the upcoming American inflation data. The numbers are expected to show that prices remained elevated as the cost of production and import rose.
AUD/USD forecast
The hourly chart shows that the AUD/USD pair has found a strong support at 0.7343. It has struggled to move below this level for a while. As a result, it has formed a descending triangle pattern and moved slightly below the 25-day and 50-day moving averages. It is also approaching the 38.2% Fibonacci retracement level.
Therefore, the pair will likely break out lower as bears target the next key support at 0.7290, which is along the 50% retracement level.
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