AUD/USD holds steady above mid-0.7700s, seems vulnerable
- AUD/USD found some support after the RBA announced its monetary policy decision.
- A softer risk tone benefitted the safe-haven USD and capped the upside for the aussie.
- The lack of any meaningful buying supports prospects for a further near-term downfall.
The AUD/USD pair struggled for a firm intraday direction and remained confined in the previous day's trading range through the Asian session. The pair was last seen trading just above mid-0.7700s, nearly unchanged for the day.
The pair failed to capitalize on the previous day's goodish rebound from the vicinity of the 0.7700 mark, or near three-week lows and edged lower during the early part of the trading action on Tuesday. The downtick was sponsored by some follow-through US dollar buying, which remained well supported by the optimism over a relatively faster US economic recovery from the pandemic.
The narrative was reinforced by the US ISM Manufacturing PMI, which jumped to a three-year high level of 60.8 in February. This comes amid the progress on a massive US fiscal spending plan, which along with the impressive pace of COVID-19 vaccinations has been fueling the reflation trade. Apart from this, a sofer risk tone extended some additional support to the safe-haven USD.
Despite the negative factors, the perceived riskier aussie found some support after the Reserve Bank of Australia (RBA) announced its monetary policy decision. As was widely expected, the RBA maintained the status-quo and decided to leave the benchmark rate unchanged at a record low of 0.10%. The RBA also stuck to its target of 10 basis points for yield on a 3-year Australian government bond.
Meanwhile, the pair's inability to gain any meaningful traction favours bearish traders and supports prospects for an extension of the recent sharp corrective fall from three-year tops. That said, traders might still wait for a sustained break below the 0.7700 mark before positioning for any further near-term depreciating move for the AUD/USD pair.
In the absence of any major market-moving economic releases from the US, the US bond yields will continue to play a key role in influencing the USD price dynamics. Apart from this, the broader market risk sentiment will be looked upon for some short-term trading opportunities around the AUD/USD pair.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
