Will AUD/LKR remain under pressure amid fading confidence in Reserve Bank policy?

Traders Union
All News
Currency
Australian dollar drops 0.96% to LKR228.67

Highlights

The Reserve Bank of Australia raised interest rates for the fifth time this year in an attempt to control inflation and support the Australian Dollar.
Confidence in the central bank's ability to reduce inflation is declining, contributing to greater risk in the disinflation process.
AUD/LKR trades below key moving averages with strong bearish technical signals and is expected to range from LKR227.53 to LKR229.81 over the next 2 to 3 days, with a 79% probability of further downside.

Cautious outlook for Australian Dollar as policy tightening meets eroding trust

Australia’s Reserve Bank recently raised interest rates for the fifth time this year, a move that typically aims to contain inflation and support the Australian Dollar, according to Investing.com. However, the Deputy Governor’s acknowledgment that public confidence in the bank’s ability to bring down inflation is eroding highlights increasing risks associated with the disinflation process. Continued monetary tightening alongside declining trust in policy effectiveness has contributed to a more cautious outlook for the Australian Dollar in current market conditions.

Strong selling dominance as oversold oscillators hint at rebound risk

AUD/LKR remains below the MA-20 at LKR230.59 and the MA-50 at LKR232.05 on the hourly chart, with the daily price also trading under the MA-200 at LKR231.99. The Ichimoku Kijun line at LKR231.01 marks immediate resistance. Both MACD and ADX register sell signals, while RSI at 15.03, Stoch RSI at 0, and CCI at –166.51 all indicate deeply oversold conditions. Bull/Bear Power stands at –1.14 and the Awesome Oscillator is also bearish, with persistent negative momentum and intraday performance signalling strong selling dominance; however, extreme lows on oscillators may point to a possible short-term bounce.

Downside favored as volatility bands define short-term scenarios

Over the next two to three trading days, AUD/LKR is expected to fluctuate within a volatility band between LKR227.53 and LKR229.81. The probability favors a continued downward move at 79%, with only a 21% chance of an upward reversal. If the pair remains within this projected range, sideways consolidation is likely; a close above resistance could prompt a short-term bullish reversal, while a break below support may accelerate recent losses.

Viktoras Karapetjanc, expert at Traders Union, observes that the Australian Dollar remains under pressure against the Sri Lankan Rupee despite ongoing rate hikes by Australia’s central bank. The analyst believes that recent warnings from the Reserve Bank about declining public confidence in inflation control have weakened sentiment, even as technical signals point to a deeply oversold AUD. Karapetjanc sees a high likelihood of further downside in the short term, though extremely low oscillator readings suggest a possible bounce is near. "If the AUD can regain ground above key resistance, tactical buyers may find an opportunity, but for now, the trend still favors the downside," he says.

Earlier, analysts noted that AUD/LKR was under persistent downward pressure amid subdued volatility and bearish technical signals. The current analysis reinforces this bearish bias, highlighting that traders should monitor the LKR227.53 support level closely, as a decisive break below it could trigger additional downside momentum.

Source of Data: AUD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.