Hawkish RBA Triggers Head & Shoulders Pattern in AUD/USD

• AUD/USD price created a head & shoulders pattern.
• RBA increased rates by 50bp.
• It might keep plunging in the upcoming weeks.

AUD/USD exchange rate maintained bearishness on Tuesday following the recent interest rate verdict by the RBA (Reserve Bank of Australia). The pair dropped towards the 0.6771 low, exploring its lowest mark since 15 July 2022. Moreover, it lost 5% from the highest zone in August last year.

RBA Rate Decision

The Reserve Bank of England ended its 2-day financial policy meeting early today. As expected, the central bank resorted to hiking interest to 2.35%, announcing a 0.50%. That represented the 4th meeting where the bank hiked interest rates.

The bank governor reiterated that the hike was essential due to the surging inflation. The central bank believes the country’s inflation will maintain upsides, averaging 7% in 2022, then retreating in 2023 to 4% and 3% come 2024. Moreover, it cautioned that forecasting inflation was somewhat challenging.

Three primary reasons triggered the AUD/USD decline. First and foremost, economists expected the Reserve Bank of Australia would execute the hike. Most scenarios see an asset moving on the contrary direction following an expected massive announcement.

Secondly, the Australian dollar plummeted due to the strong United States dollar. The USD index maintained upsides as market players project the rising global risks & the hawkish Fed Reserve. Economists trust the US Federal would stiffen tightening in the upcoming months.

Thirdly, the AUD-USD price plummeted due to the declining industrial metal prices. The highly watched industrial metals’ S&P GSCI index had declined by 10% from August 2021’s highest mark.

Leading metals from Australia, including iron ore and copper, had lost over a quarter of their respective values. Market players can expect another reaction from AUD-USD on Wednesday during the Australia GDP stats.

AUD/USD Prediction

The 4hr chart shows a massively bearish setup emerged within the last few weeks. It printed a head & shoulders formation, signaling continued price dips. Also, it moved beneath the 0.6870 support last week. That represented the head-shoulder pattern’s neckline.

The AUD-USD pair dipped under 25 &50-day MAs, whereas the AO (Awesome Oscillator) declined beneath the neutral mark. Thus, the currency can keep plummeting, targeting the 0.6700 support.