AUD/USD drops back to 0.7750 as RBA highlights July for action
|- AUD/USD reverses from intraday high on RBA inaction.
- RBA matches wide market forecast of keeping monetary policy unchanged, teases July action.
- Risk appetite seeks fresh impulse amid firmer US Treasury yields, sluggish stock futures.
- US traders’ reaction to latest updates, ISM Manufacturing PMI eyed.
AUD/USD trims the intraday gains with a 25-pips drop to 0.7737, up 0.16% intraday around 0.7750, following the Reserve Bank of Australia’s (RBA) Interest Rate Decision during early Tuesday. The Aussie pair cheered broad US dollar weakness and mildly positive catalysts at home, also in China, during the Asian session.
RBA kept its benchmark rate near 0.10% and announced no change in its bond purchase targets while signaling a possible decision in July.
Read: RBA: Will consider future bond purchases in July meeting
It should be noted that Asian economics comprising PMIs from China and Australia, as well as Aussie Building Permits favored AUD/USD earlier in Asia amid mildly positive markets.
Market sentiment fails to justify the 2.3 basis points (bps) of a jump in the US 10-year Treasury yield as the S&P 500 Futures remain directionless near 4,200 and the stocks in Asia-Pacific trade mixed by the press time.
Behind the moves is the indecision over the US Federal Reserve’s (Fed) next moves amid escalating inflation pressure and a sustained rejection to reflation fears from the Fed policymakers. Also confusing the traders could be the looming talks over US President Joe Biden’s multi-billion dollars’ worth of stimulus packages that struggle inside the decision-body amid tax-hike concerns.
Meanwhile, the US-China tussles and the Canberra-Beijing tension exert downside pressure on the AUD/USD prices, due to its risk-barometer status.
Having witnessed the initial reaction to the RBA moves, actually no moves, AUD/USD traders will wait for the full markets’ response to the recent catalysts concerning the US inflation and tapering, not to forget the stimulus. This highlights today’s US ISM Manufacturing PMI even if is likely to repeat the 60.7 level. The reason could be spotted for the traders’ search of the early signals of inflation and employment ahead of Friday’s US Nonfarm Payrolls (NFP) as well as the next Federal Open Market Committee (FOMC).
Read: ISM Manufacturing PMI Preview: NFP Hint? Inflation component to steal the show, rock the dollar
Technical analysis
AUD/USD bulls a daily closing beyond 0.7760 hurdle, comprising three-week-old resistance line and 21-day SMA, else prices could drop back towards a confluence of 100-day SMA and the monthly rising trend line offers short-term key support near 0.7710.
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