AUD/USD: Bears catch a breath near 0.6970 as all eyes on RBA
|- Disappointing Chinese data, stronger greenback stop the Aussie pair from cheering the market optimism.
- RBA is expected to announce a second rate cut of the year worth of 0.25%.
Following a day filled with heavy losses, mainly due to market’s buying preference for the US Dollar (USD) and downbeat activity numbers from China, AUD/USD seesaws near 0.6970 ahead of the RBA’s key monetary policy meeting decision up during early Tuesday.
With the US-China trade truce taking one major challenge off from the US economy, also from the global system, the US Dollar (USD) managed to register notable gains while welcome prints of the ISM Manufacturing Purchasing Managers’ Index (PMI) added strength into the greenback.
Not only the USD’s inverse relationship with the commodity-linked currencies but sluggish PMI numbers from China, the world’s largest commodity user, also weighed on the Aussie.
With this, the Australian Dollar (AUD) failed to take advantage of renewed market optimism that helped global equities and pulled the bond yields upwards from their recent lows. The 10-year US treasury yield recovered to 2.033% by the press time.
Investors now await monetary policy decision from the Reserve Bank of Australia (RBA). The Australian central bank is widely anticipated to announce another rate cut of 2019 with a magnitude of 25 basis points (bps) resulting 1.00% cash rate.
In this regard, TD Securities’ report says:
With the market broadly split going into the decision, we look for the RBA to cut the cash rate to 1%. OIS is 65% priced for a cut, and Governor Lowe passed up an opportunity to push back on pricing in a speech last week, which suggests he favors a July cut. We expect no forward-looking commentary on rates from this meeting.
Technical Analysis
Multiple levels ranging since mid-May can offer support to the pair around 0.6940/35 ahead of highlighting 0.6900 round-figure for sellers. On the contrary, 100-day exponential moving average (100-D EMA) level of 0.7022 seems nearby key resistance to watch.
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