AUD/USD rebounds as RBA defies rate cut forecasts, US Dollar stalls

• AUD/USD recovers as the Reserve Bank of Australia surprises markets with an interest rate hold.
• Trade uncertainty limits US Dollar strength, supporting the Australian Dollar.
• AUD/USD eyes 0.6550 resistance as Golden Cross supports broader uptrend.

The Australian Dollar (AUD) is making a recovery against the US Dollar (USD) on Tuesday, following the Reserve Bank of Australia's (RBA) decision to maintain its main interest rate at 3.85%.

Following a 1% decline on Monday, the Australian central bank's announcement provided a boost to the AUD/USD, which is currently trading near 0.6530 at the time of writing.

According to a Reuters poll released on Friday, 31 out of 37 economists anticipated that the central bank would announce a third consecutive 25-basis-point rate reduction on Tuesday.

Against these widely anticipated and largely priced-in expectations, markets continued to digest the positive US jobs data released last Thursday.

So far this year, a healthy labour market has allowed the Federal Reserve (Fed) to maintain rates between 4.25% and 4.50%.

The most recent NFP exhibited a healthy US labor market, which decreased wagers on the Fed reducing rates in July.

This higher demand for US yields, positive for yield differentials between Australia and the US, followed.

However, a surprising hawkish move by the RBA served as a bullish trigger for AUD/USD on Tuesday.

AUD/USD eyes 0.6550 resistance as Golden Cross supports broader uptrend

AUD/USD is currently heading toward the 61.8% Fibonacci retracement of the September-April sell-off, providing resistance around 0.6550. Prices remain within a rising wedge on a daily timeframe.

The rejection around the upper wedge and below the psychological 0.6600 barrier raised expectations of a bearish reversal last week. However, positive momentum remains supported by the 50 and 200-day Exponential Moving Averages (EMAs), currently plotted at 0.6475 and 0.6436, respectively.

These moving averages have formed a Golden Cross (a bullish technical pattern that forms when the 50-day EMA rises above the 200-day EMA), indicating a larger uptrend.

AUD/USD daily chart

A reading of 54 on the Relative Strength Index (RSI) suggests neutral momentum with a slight positive slant.

A break and hold above the EMAs on a sustained basis and a test of the 0.6600 round number could potentially form a target toward the high of November at 0.6689 and the 78.6% retracement at 0.6722.

However, a break below wedge support around 0.6372 would be a major shift in market structure, exposing prices to another leg lower toward the 0.6200 zone.