- AUD/USD struggles to gain any meaningful traction as traders opt to wait for the RBA rate decision.
- An extension of the US-China trade truce supports the Aussie, though a bullish USD caps the upside.
- Rising Fed hike bets, surging US bond yields and geopolitical risks benefit the safe-haven Greenback.
The AUD/USD pair extends its consolidative price moves through the Asian session on Tuesday, trading just above the 0.7000 psychological mark, near the lowest level since August 4 ahead of the Reserve Bank of Australia (RBA) decision.
The Australian central bank is widely expected to raise the Official Cash Rate (OCR) by 25 basis points (bps) after keeping rates unchanged at its previous two meetings. Meanwhile, the key focus will be on the accompanying Monetary Policy Statement (MPS) and RBA Governor Michele Bullock’s comments at the post-meeting press conference. Investors will look for cues about the future policy path, which, in turn, would drive the Australian Dollar (AUD) and provide some impetus to the AUD/USD pair.
Any positive reaction to a hawkish RBA outlook, however, is more likely to be limited amid the prevailing bullish sentiment surrounding the US Dollar (USD). Investors have been pricing in a greater possibility of another interest rate hike by the US Federal Reserve (Fed) in October amid energy-driven inflationary concerns, which continue to push US bond yields to multi-year highs. Apart from this, geopolitical uncertainties keep the US Dollar (USD) near a two-month high and should cap the AUD/USD pair.
Meanwhile, the US and China have extended their tariff truce by two months following a summit between President Donald Trump and his Chinese counterpart Xi Jinping, which could support the Aussie. Hence, it will be prudent to wait for a convincing break and acceptance below the 0.7000 mark before placing fresh bearish bets on the AUD/USD pair and positioning for an extension of a three-week-old corrective decline from the highest level since May 14, touched earlier this month.
AUD/USD daily chart
Technical Analysis
The AUD/USD holds just beneath the 200-day Simple Moving Average (SMA) at 0.7027, which reinforce a mildly bearish near-term bias. Spot prices, however, hold above the 61.8% Fibonacci retracement support at 0.7006, which might continue to protect the immediate downside. This is followed by the 78.6% retracement at 0.6943, where buyers may attempt to stabilize the pullback if selling pressure resumes.
On the topside, immediate resistance is seen at the 200-day SMA at 0.7027, followed by the 50.0% retracement at 0.7050. Stronger supply is likely to emerge near the 38.2% level at 0.7095 and the 23.6% retracement at 0.7149 if the AUD/USD pair manages to extend a corrective bounce.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.
Read more.Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.