AUD/USD loses traction, closes in on 0.67 handle ahead of RBA announcements

The AUD/USD pair closed the previous week virtually unchanged 0.6737 and started the new week in a calm manner as the upbeat data from China allowed the Aussie to stay resilient against the USD. However, with the Greenback continuing to gather strength, the pair lost its traction and was last seen trading at 0.6711, losing 0.37% on the day.

Easing fears over a protracted US-China trade war last week and a recovering market sentiment helped antipodeans limit their losses. Earlier today, the data from China showed that the business activity in the manufacturing sector expanded at a modest pace with the Caixin Manufacturing PMI arriving in above the 50 mark, compared to analysts' estimate of 49.8.

Nevertheless, the broad USD strength despite the Labor day holiday in the US made it difficult for the pair to stage a meaningful rebound. Although there were no fundamental drivers that could have ramped up the demand for the Greenback, the selling pressure surrounding major European currencies seems to be providing a boost to the currency. At the moment, the US Dollar Index, which tracks the dollar's value against a basket of six major currencies, is at its highest level since May 2017 at 99.10.

Eyes on RBA

In the early trading hours of the Asian session on Tuesday, the Reserve Bank of Australia will announce its policy rate and will publish the policy statement. Previewing the event, TD Securities analysts said that they were expecting the RBA to keep the policy rate steady at 1%. “RBA forecasts assume 2 further cuts, which we expect in Nov'19 and May'20. The risk to our forecast is for the Bank to pull the trigger earlier, not later,” analysts added.

Technical levels to consider