Synopsis:

Westpac provides an analysis and trading strategy for the Australian Dollar (AUD) in light of recent developments from the Reserve Bank of Australia (RBA).

Key Points:

• RBA Rate Hike: The RBA's recent rate hike was more aggressive than what had been fully priced into the market, indicating a firmer stance on tightening monetary policy to combat inflation.

• AUD Price Action: Despite the rate hike, the Australian Dollar has weakened against other currencies, which could be seen as a lack of market confidence or a reaction to other global factors influencing currency strength.

• Short-Term Support: Westpac expects that, after initial reactions subside, market focus will return to factors that support the AUD in the short term, including improved yield spreads which make AUD assets more attractive relative to others.

• AUD/USD Strategy: They forecast the AUD/USD pair to attract buyers at the higher end of the 0.63 range, suggesting there is potential for the currency pair to test the resistance level of 0.6520/25 over multiple days.

• AUD/NZD Strategy: For the AUD/NZD pair, Westpac favors a long position with a multi-week target of 1.1050, implying they anticipate the AUD to strengthen against the New Zealand Dollar.

Conclusion:

Westpac remains optimistic about the Australian Dollar's short-term prospects, backed by favorable yield spreads and the recent rate hike by the RBA. They propose specific trading strategies for AUD/USD and AUD/NZD pairs, highlighting key levels to watch for entry points and targets for taking profits.