Australian Dollar hits three-month high after China stimulus, RBA decision

• Australian Dollar reaches a three-month high of 0.6852 against the US Dollar on Tuesday.
• AUD/USD is supported by China's stimulus measures, a weaker USD, and positive global market sentiment.
• RBA held rates steady and maintained its hawkish stance, further supporting the AUD.

The AUD/USD pair rallied to near 0.6870 in Tuesday's North American session, producing a three-month high. The Aussie asset gained ground after China's massive stimulus boost to revive household spending, real estate demand, and economic growth. The Reserve Bank of Australia (RBA) held rates steady and maintained a hawkish posture, also adding to the Aussie's gains.

The Australian economic outlook is uncertain, but the RBA has taken a hawkish stance due to high inflation. As a result, markets are now expecting only a 0.25% interest rate cut in 2024. This is a significant change from previous expectations, which included a series of rate cuts. The RBA's decision to adopt a hawkish stance has dampened market sentiment and led to a decrease in inflation expectations.

Daily digest market movers: Aussie on the rise after RBA hold, CPI data in focus

• RBA holds rates steady at 4.35%, signaling no near-term rate cuts despite recent data.
• Michele Bullock, chair from the RBA then delivered a press conference, repeating her well-known hawkish message and affirming rates will remain on hold for the time being.
• Bullock added that the Board does not see rate cuts in the near term, as recent data has not "materially affected" the policy outlook.
• In addition, the PBoC announced measures to support the Chinese economy, including a 50 bps RRR cut and a 0.2% reduction in the 7-day repo rate. Any support or aid given to the Chinese economy tends to benefit the Aussie.
• AUD/USD also gains further ground after tepid US data fuels speculation of a 50 bps Fed rate cut in November.
• Australia's August Monthly Consumer Price Index is expected to rise by 2.8%, down from 3.5% in July.

AUD/USD technical outlook: Bullish momentum mounts with pair nearing July 2023 highs

AUD/USD's upward movement shows potential. Daily indicators indicate a positive trend, but the AUD/USD is not yet in overbought territory, so the pair has some more room to continue the trend.

Bulls will face strong resistance at the 0.6900-0.6930 range. In case of being rejected the pair could fall to the 0.6800-0.6850 zone to consolidate the recent gains.