• AUD/USD strengthened on Tuesday after RBA held interest rates steady as expected and cautioned that inflation risks had tilted higher, but stopped well short of flagging hikes.
• The Reserve Bank of Australia concluded its final policy meeting of the year by holding the cash rate steady at 3.6%, extending the pause in easing since the July rate cut..
• Policymakers flagged inflation risks and stronger-than-expected domestic demand, while cautioning that more time is needed to assess the durability of inflation pressures..
• The RBA has delivered three rate cuts this year, but inflation has begun to re-accelerate, rising for a fourth consecutive month to 3.8% in October..
• Futures imply just a 12% chance of a hike at the RBA's next meeting on February 3, rising to around 50% by May. A quarter-point move to 3.85% is fully priced for August.
• Immediate resistance is located at 0.6656(Higher BB), any close above will push the pair towards 0.6704(23.6%fib).
• Support is seen at 0.6614 (38.2%fib) and break below could take the pair towards 0.6548(50%fib).
Recommendation: Good to buy around 0.6620, with stop loss of 0.6550 and target price of 0.6670
