Aussie Gains Strength Against European Currencies on Hawkish RBA Stance

The Australian dollar is gaining strength against European currencies due to a combination of factors. The Reserve Bank of Australia (RBA) is expected to maintain its hawkish stance, and higher energy prices are benefiting the Aussie's terms-of-trade.

Recent data has shown that inflation in Australia is lower than anticipated, which may reduce the urgency for an immediate rate hike. However, markets still expect one more increase in interest rates this cycle.

The RBA's forecasts for growth, unemployment, and inflation are likely to remain similar to those released in May, with some potential upgrades in its language regarding household spending.

The Aussie dollar is also benefiting from its status as a major energy exporter, which means higher energy prices deliver a positive terms-of-trade shock. This advantage puts the Australian currency at an upper hand against European crosses such as EUR/AUD and GBP/AUD.

From a technical perspective, EUR/AUD looks heavy on charts, with support at 1.6340. A break below this level could set up shorts targeting 1.6260 or even lower levels of 1.6130.