AUD/USD climbs above 0.7760 ahead of RBA's policy announcements

The AUD/USD pair moved sideways in a relatively tight range above 0.7700 and gathered bullish momentum during the American trading hours. As of writing, the pair is trading at a fresh daily high of 0.7764, rising 0.65% on a daily basis.

At the start of the week, the USD's market valuation remained the primary driver of AUD/USD's action. With risk flows returning to markets on Monday, the US Dollar Index (DXY) turned south and extended its slide in the second half of the day pressured by falling US Treasury bond yields.

The data from the US showed that the ISM Manufacturing PMI in April edged lower to 60.7 from 64.7 in March, compared to analysts' estimate of 65. Although investors largely ignored this report, the benchmark 10-year US T-bond yield fell more than 2% and the DXY  dropped below 91.00.

Furthermore, major equity indexes opened in the positive territory and allowed risk-sensitive AUD to continue to outperform its American counterpart.

Focus shifts to RBA

In the early trading hours of the Asian session, the Reserve Bank of Australia (RBA) will announce its Interest Rate Decision and publish the Rate Statement. 

Previewing the RBA event, "we continue to expect the cash rate to remain unchanged until 2024 and expect a full AUD100bn extension of quantitative easing (QE) beyond the second round," said UOB Group economist Lee Sue Ann. "That said, we think that Yield Curve Control (YCC) may not be extended past the April 2024 bond, with the RBA no longer able to credibly commit to rates staying at 0.10% beyond this point."

Technical levels to watch for