ASX 200, AUD/USD diverge after the RBA interest rate decision

The ASX 200 jumped while the AUD/USD pair slipped after the latest interest rate decision by the Reserve Bank of Australia (RBA). The blue-chip index rose to A$7,480, the highest level since July 27th. It is hovering near the year-to-date high of A$7,505.

RBA interest rate decision

The ASX 200 index and the AUD/USD exchange rate diverged after the RBA decided to leave interest rates unchanged. It left the official cash rate intact at 4.25% while most analysts were expecting another 0.25% rate hike.

In his statement, outgoing RBA chief, Philip Lowe, said that Australia’s inflation was falling although it remained too high at 6%. This figure is higher than the bank’s target of 2.0%. It expects that inflation will remain about 3.75% by the end of 2024.

In justifying the rate pause, the RBA noted that the Australian economy was going through a below-trend growth rate with household consumption falling. It now expects that the country’s economy will expand by 1.75% in 2024. The statement added:

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks.”

The AUD/USD pair retreated because RBA’s decision was different from what the Fed did. As we wrote here, the Fed decided to hike interest rates by 0.25% and pushed the official cash rate to 5.50%.

The ASX 200 index constituents were relatively mixed. Bank stocks like Westpac, ANZ Group, CBA, and Macquarie Bank shares jumped by more than 0.50%. Similarly, big companies like BHP Group, Fortescue Mining, Woodside Energy, and Wesfarmers rose.

ASX 200 index forecast

The ASX 200 index continued rising as I predicted in my last article. On the four-hour chart, the index has jumped above the 50-day and 25-day moving averages. It has also moved above the important support at $7,392 (June 20 high).

The Relative Strength Index (RSI) moved above the neutral point at 50. At the same time, the Stochastic Oscillator moved to the overbought level. Therefore, the index will likely continue soaring as buyers target the key resistance point at $8,000.

AUD/USD forecast

The AUD/USD exchange rate drifted downwards as the US dollar index rally continued. It dropped to a low of 0.6662, lower than last Friday’s high of 0.6737. The pair moved below the 25-day moving average. It also slipped below the key psychological level at 0.6700.

Therefore, the AUD to USD pair will likely continue falling as sellers target the key support at 0.6600.

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