AUD/USD edges lower ahead of RBA minutes, Lowe is out

• Australian dollar soared over 2% last week
• RBA minutes to be released on Tuesday
• RBA Governor Lowe will be replaced by Michelle Bullock

The Australian dollar has started the week in negative territory. In the European session, AUD/USD is trading at 0.6816, down 0.32%. The Aussie is coming off a banner week, with gains of 2.18% against the US dollar.

Has RBA hit the terminal rate?

The Reserve Bank of Australia releases the minutes of the July 4th meeting on Tuesday. At that meeting, the RBA took a pause and maintained the cash rate at 4.10%. The burning question is whether interest rate levels have peaked. The markets are more confident that the RBA is leaning towards another pause in August, with a 75% probability of a 25-bp hike in August, compared to 48% just a week ago.

The RBA has based its rate decisions on key economic data, in particular, inflation and employment reports. Thursday’s employment report will be a key factor in the RBA rate decision. If the employment numbers are stronger than expected, we’ll likely see the markets revise higher the probability of a rate hike in August.

There was a feeling in the air that RBA Governor Lowe would be shown the front door, and the axe came down on Friday. Lowe has been heavily criticised for assurances he made as late as November 2021 that he would not raise rates until 2024, only to embark on an aggressive rate-hike campaign soon after.

The RBA’s zig-zagging of rate hikes and pauses hurt the central bank’s credibility, and a recent review of the RBA found that major structural changes were needed. Add a 7% inflation level to the mix, and it’s not difficult to see why the government decided that a change was needed at the helm of the RBA.

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AUD/USD Technical

• There is resistance at 0.6855 and 0.6947
• 0.6786 and 0.6676 are providing support

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