Will the AUD turn on Tuesday’s rate hike?

The Reserve Bank of Australia (RBA) will release its interest rate decision on Tuesday September 6. Forecasts are for another half-percent increase in the cash rate. If forecasts hold up, Tuesday’s rate hike will be the fourth consecutive 50-basis-points increase from the RBA, lifting the cash rate to 2.35% from the current 1.85%.

Still, even with another rate hike under RBA’s belt, not many investors are pegging the AUD to start outperforming the USD to any great degree or for any sustained period.

To analyse the current trend for the AUD/USD, we can use the Trend Meter Indicator. This indicator can help confirm whether the direction of a pair might turn. The Trend Meter Indicator aggregates the data from several other indicators to measure the current strength of the movement, such as the MACD, RSI signal line cross, and MA cross. If the Trend Meter Indicator shows green dots consecutively, the trend is seemingly bullish and will likely continue so long as it stays on the green side. However, if a red dot appears after a long streak of green dots, the trend might be thought to reverse.

With the use of the trend meter indicator, we can see that the indicator has already given a bearish signal at the end of August on the daily timeframe by providing a red dot indication.

Since then, there has been no sign of green dots, which means that the trend on the downside is still intact, even with support being created at 0.67800.

Traders who want to trade the pullback to the upside might want to wait for the green dot signal using this indicator. Otherwise, it may be wiser to looking for a bullish Australian dollar with other AUD pairs.