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AUD/USD Price Forecast: Sets for volatility expansion

- AUD/USD rises at the expense of the US Dollar, which is down due to the US credit rating downgrade. - US Republicans didn’t pass President Trump’s new tax bill. - The RBA lowered its OCR by 25 bps to 3.85% and kept hopes of more interest rate cuts on the table. The AUD/USD pair moves higher to near 0.6460 during European trading hours on Wednesday. The Aussie pair gains as the US Dollar (USD) continues to underperform its peers on the back of the United States (US) Sovereign Credit rating erosion. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides to near 99.50, the lowest level seen in two weeks. On Friday, Moody’s downgraded the US long-term issuer rating by one notch to Aa1 from Aaa amid concerns over a large fiscal deficit and hopes of a further increment in the total debt after the clearance of President Donald Trump’s tax-cut bill. However, US President Trump failed to convince Republicans to back the new tax bill in a closed meeting at the Capitol Hill on Tuesday. Meanwhile, the Australian Dollar (AUD) trades mixed on Wednesday after a 25-basis point (bps) interest rate reduction by the Reserve Bank of Australia (RBA) the previous day. The RBA lowered its Official Cash Rate (OCR) by 25 bps to 3.85%, as expected, amid confidence that inflation will stay lower. The RBA kept the door open for further monetary policy expansion if it continues to see inflation coming down. AUD/USD consolidates in a tight range of 0.6340-0.6515 for over a month. The pair wobbles near the 20-day Exponential Moving Average (EMA) around 0.6410, indicating a sideways trend. The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00, suggesting a volatility contraction. More upside would appear towards the November 25 high of 0.6550 and the round-level resistance of 0.6600 if the pair if the pair breaks above the May 7 high of 0.6515. On the flip side, a downside move below the March 4 low of 0.6187 will expose it towards the February low of 0.6087, followed by the psychological support of 0.6000. AUD/USD daily chart

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Publication date:

2025-05-21 11:35:40 (GMT)

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