AUD/USD hovers around 0.6690 ahead of RBA interest rate decision

AUD/USD seesaws near 0.6690 at the start of Tuesday’s Asian session. The Aussie pair struggles around the yearly lows, clubbed between the recovery of the market’s risk-tone and the greenback, with all eyes on the Reserve Bank of Australia’s (RBA) interest rate decision.

US data benefit the US dollar…

The US ISM Manufacturing PMI crossed 50.00 mark for the first time in six months while also surpassing 48.5 forecast during January. Even if the data doesn’t take full accounts of coronavirus impact, it managed to help the USD recover some of its latest losses. Additionally, the US Markit Manufacturing PMI for January also rose beyond 51.7 forecast and prior to 51.9, offering an extra leg-up to the US currency.

Coronavirus seems to turn weak, at least over the market’s risk-off…

The fear of China’s coronavirus outbreak remains on the cards as China's President Xi Jinping said, on Monday, that their most important task at the moment is the control of the coronavirus. The number of infected people reached close to 15,000 while the death toll rose beyond 350 globally. To avoid being a victim, global peers went on to cutting their trade/travel connection to China. However, the World Health Organization’s (WHO) Chief, Dr. Tedros, reiterated that there’s no need for measures that unnecessarily interfere with international travel and trade.

The full markets return couldn’t do much harm to the rest of the equities except for China that lost more than 7% on the first day of trading since January 23. Also, the US 10-year and 2-year treasury yields, mostly known as the market’s risk-barometers, remain largely unchanged near 1.53% and 1.35% respectively.

RBA is in the spotlight…

Considering the recently mixed picture of economics at home, the RBA isn’t expected to alter the current monetary policy, leaving the benchmark interest rate at 0.75%. However, the Australian central bank’s rate statement will be closely observed to predict the future course of action as underlying sentiment are still bearish and opt for rate cuts during the year.

The recent shift in Aussie employment data and inflation numbers pushed TD Securities to change their imminent rate cut calls as they said, “We are looking for an on-hold decision and think the same is likely at their March meeting. Previously, we had anticipated the RBA cutting the cash rate next month. This view was based predominantly on domestic fundamentals, but the tone of data turned more positive since late last year. Our expectation for a dovish hold this week could certainly see AUDUSD test this low. Beyond that, however, we think the AUD has a lot of bad news in its price. That said, we prefer to be careful and selective in leaning against the market's pervasive AUD bearishness.”

Read: RBA Preview: Imminent cut expectations to weigh heavily on AUD

It should also be noted that the US Factory Orders for December, expected +1.1% versus -0.7% prior, could entertain traders after the RBA. Though, one shouldn’t ignore news from China in any case.

Technical Analysis

FXStreet’s Ross J Burland marks the AUD/USD pair’s nearness to the key supports as an important catalyst to watch for action surrounding the RBA:

AUD/USD has dropped almost 5% since the start of the year and has moved to the lowest level since October 2019, a critical support structure that could make or break the pair for weeks ahead. The prior supports have not held up and there have been no long set-ups signaled on the four-hour charts while bears have been in control all the way, bar the occasional correction on glimmers of hope from Australian data ahead of the Reserve Bank of Australia this week.