AUD/USD retreats as CBA predicts a 2022 RBA rate hike

on Jun 23, 2021
  • The AUD/USD pair retreated slightly after the CBA prediction on rate hike.
  • The bank’s analysts expect the RBA will hike rates in 2022.
  • The pair also reacted to new Sydney lockdowns

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The AUD/USD was little changed on Wednesday as investors reflected on the strong Australian manufacturing and services data and new lockdown in Sydney. It is trading at 0.7545, which was slightly below this week’s high of 0.7565.

AUD/USD chart

CBA RBA policy outlook

The AUD/USD hovered after analysts at the Commonwealth Bank of Australia (CBA) hinted at a possible rate hike in 2022. In a note, the analysts said that they expect the RBA to implement a 0.15% rate increase in late 2022. This will be earlier than the previous estimate of 2024. The prediction comes a week after analysts at Westpac predicted that the bank will hike in early 2023. The analysts said:

“Our central scenario has the RBA delivering the first hike in the cash rate in November 2022. We have penciled in an increase of 15 [basis points] which would take the cash rate to 0.25 percent.”

In its recent RBA interest rate decision, the bank decided to leave interest rates unchanged and continue with its asset purchases program.

The new update by CBA came a few hours after Markit published relatively strong flash manufacturing and services PMI numbers. Services PMI declined from 58.0 in May to 56 in June while the manufacturing PMI fell from 60.4 to 58.4. This decline was because of the recent lockdowns in Victoria to curb the spread of coronavirus. Still, a PMI figure of 50 and above is a sign that the sectors did well.

Meanwhile, the AUD/USD is reacting to new lockdowns in Sydney. In a statement on Wednesday, the Sydney government added some restrictions like limits on guests. It also barred residents of several areas of Sydney from leaving the metropolitan area. 

AUD/USD forecast

AUD/USD technical chart

The hourly chart shows that the AUD/USD has risen slightly from its lowest level last week. The pair has managed to move above the 23.6% Fibonacci retracement level. It has also formed an ascending channel that is shown in blue. Further, it has moved above the 25-day and 50-day exponential moving averages. 

Therefore, I suspect that the pair will keep falling as bears target the lower side of the channel at 0.7500. However, a move above this week’s high at 0.7565 will invalidate this trend.