• AUD/SD traders await the Federal Reserve for next cues. 
• Bears digging into support in a firm correction. 

AUD/USD lept over 1% against the US Dollar on Tuesday after a surprise rate hike by the Reserve Bank of Australia, RBA, reaching a high of 0.6717 from a low in the 0.6620s. 

The RBA hiked 25bp to 3.85%. ´´Given our own concerns about the stickiness of services and non-tradable price inflation, plus the robustness in the labor market and the business sector, we expect another 25bp rate hike in August,´´ analysts at ANZ Bank explained. 

The RBA began hiking rates back in May 2022 and has made 375 bp of tightening so far. According to analysts at Brown Brothers Harriman, there are ´´no more hikes priced in and the easing cycle is priced to start Q1 2024 with 25 bp of easing seen over the next 12 months and 50 bp over the next 24 months.´´

Meanwhile, the US Dollar is bid ahead of main events of the week that begin Wednesday with the Federal Reserve that began its own tightening cycle in March 2022 with 475 bp of tightening so far. the markets are pricing in another 25 bp with the easing cycle priced to start in November.

´´We expect a 25bp rate hike at next week's FOMC meeting and anticipate that post-meeting communication will: (i) emphasize that disinflation has been evolving slower than expected, leaving open the possibility of additional tightening, and (ii) acknowledge the more uncertain economic environment, especially with regard to credit conditions post SVB collapse,´´ analysts at TD Securities explained. 

AUD/SD technical analysis

AUD/USD is holding in support but there could be another thrust from the bulls in the coming days with 0.6750 eyed. However, it depends on the outcome of the Federal Reserve and markets will be data-dependent.