AUDUSD is trading in a very support/resistance-heavy area ahead of tomorrow’s RBA decision.

The RBA is widely expected to cut rates by 0.25%. The central bank is likely to factor in the government’s extended electricity subsidies, and combined with weak GDP data, a rate cut appears almost certain. Since 2000, Australia’s average quarterly GDP growth has been 0.7%. However, since Q3 2022, the figures have consistently come in below average, pointing to prolonged economic weakness.

That said, recent data has shown some improvement. The most recent GDP came in at 0.6%, marking four consecutive quarters of growth in GDP. CPI held steady at 2.4%, beating the 2.2% forecast. Quarterly wage growth rose to 0.9% from 0.7%, and employment increased by 89k , nearly quadruple the forecast and triple the previous month’s figure.

Despite the positive shifts, the combination of persistent weakness, electricity subsidies, and already high interest rates suggests the RBA will need to act. The market currently expects three cuts this year, including the one anticipated tomorrow.

AUDUSD is caught between a weak U.S. dollar and a weak Aussie dollar, and the degree of dovishness from the RBA will be critical this week. A broad resistance zone is currently capping gains. The 0.6450–0.6550 range is key, as it has seen significant volume since August 2023, with multiple tops and bottoms forming within this area. If a breakout occurs, the longer-term trend channel (yellow line) could become the next upside target.

On the downside, watch the 0.6350 support level and the area surrounding it for potential reactions or a clear break with following downward reaction.