The AUD/USD is up 0.53%, as traders take profits from the USD strength of the last two weeks. This will be the second day of gains as the USD falters from retail sales data that show a drop in the real retail sales.
At 1.30 am GMT, the minutes of the July meeting of the Reserve Bank of Australia (RBA) will be released. On Wednesday, 20 July, the RBA Governor Philip Lowe will speak at a business forum in Melbourne.
Regarding the RBA minutes, the markets are expecting commentary that points to another 50bps rate hike in August. Westpac has projected 50bps and 25bps rate hikes for August and September, respectively, with a pause in October as the housing market groans under the weight of higher rates. The key point here is the September rate decision, with Westpac expecting a 25bps hike due to the latest inflation and employment data.
The scope of the RBA’s monetary policy tightening may be evident from the RBA minutes. Commentary that suggests a very aggressive move in the August 2022 meeting (75bps and above) would put the Aussie Dollar in a position to top the greenback. Otherwise, an indication of a 50bps rate hike or less could put the AUD/USD in place to provide rally-sell opportunities on the pair, banking on the interest rate divergence between the RBA and the Fed.
The pair is testing the channel’s trendline and the 0.68302 resistance. A break of this level sends the pair toward the 21 June high at 0.69926. Above this level, 0.70973 and 0.72420 (25 February and 8 June highs) are additional price targets to the north.
On the flip side, rejection at 0.68302 creates a chance for the bears to push toward 0.67587 (5 July low). A breakdown of this support brings in 0.66742 before 0.66170 (28 May 2020 high in role reversal) forms an additional pivot for price action.