• RBA holds the Cash Rate at 4.1%
• AUDUSD falls despite warning that further hikes remain an option
• Key technical support eyed after brief consolidation

The Australian dollar softened this morning after the RBA opted to leave the Cash Rate at 4.1% but warned some further tightening may be required.

The decision and statement – the first under new Governor Michele Bullock – was largely in line with what we’ve heard before and was a long way from suggesting another rate hike is imminent.

The language around further hikes potentially being needed is being used by all central banks that have just undergone a severe tightening process as they are hesitant to declare victory until it’s absolutely clear without doubt. That’s what happens when you’re heavily criticized for a slow start.

In reality, the RBA like most other central banks is probably done. We are seeing a lot of hawkish commentary from policymakers at the moment though, perhaps one final hawkish push to get every last drop from their tightening efforts, which is clearly unsettling investors.

The data will obviously be crucial now as we’re entering a period in which it’s assumed substantial progress will be seen. That alongside the lag effects of past measures could see that language soften a little from some policymakers, although others like the Fed may hold the hawkish line for longer as the labour market remains remarkably resilient.

AUDUSD nearing multi-year lows

The recent decline took the AUDUSD pair to its lowest level in almost a year following a couple of months of consolidation.

AUDUSD Daily

Source – OANDA on Trading View

The question now is whether this represents the start of a fresh decline or not. The MACD and stochastic suggest there is some momentum behind the move, albeit not a huge amount which may suggest there is more to it.

At which point technical support below could be of interest, especially when paired with those momentum indicators. A break of those prior support levels around 0.6272 and 0.6170 would take the pair to levels not seen since 2020 so it could be an interesting test of support.

A rebound higher may suggest the move lacks momentum and could be a sign of trend exhaustion after a quite substantial decline over the last few months.