Australian dollar eyes RBA minutes

The Australian dollar is unchanged at the time of writing, trading at 0.6692 in the European session.

There are no economic releases out of the US or Australia today, which should translate into a quiet day for AUD/USD.

The Aussie is coming off an excellent week, gaining 1.36% and hitting its highest level since January. In the month of May, AUD/USD has surged 3.4%.

Tuesday will be busier, with the Reserve Bank of Australia releasing the minutes of the policy meeting earlier this month. At that meeting, there were no surprises as the RBA held the cash rate at 4.35% for a fourth straight time.

Notably, the central bank discussed the possibility of a rate hike at the meeting, which was not the case at the March meeting. This was likely a response to first-quarter CPI, which was slightly higher than expected. CPI fell from 4.1% to 3.6%, missing the forecast of 3.5%. Service inflation remains sticky, which means that CPI is expected to continue to ease, but slowly.

RBA policy makers are concerned that the path to the 2% inflation target will be bumpy and are hesitant to start lowering rates until they see evidence of sustainable price stability. The fact that a rate hike is on the table, albeit an unlikely scenario, indicates that the RBA remains cautious and somewhat hawkish, and a rate cut will have to wait until inflation shows a substantial decline.

Australia will also release Westpac Consumer Sentiment on Tuesday. The index has declined two straight times and remains in negative territory as consumers remain surly about high interest rates and the high cost of living. The May release is expected to show an improvement, with a market estimate of a 0.9% gain.

AUD/USD Technical

• AUD/USD has support at 0.6681 and 0.6662
• 0.6714 and 0.6733 are the next resistance lines

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