AUD/USD keeps pullback from 0.7000 after RBA’s inaction

AUD/USD stays compressed around 0.6965, down 0.10% on a day, after the Reserve Bank of Australia (RBA) repeated its status-quo during the early Tuesday. The Aussie central bank kept the benchmark interest rate near the record low of 0.25% with no change in the Quantitative Easing (QE) program. Even so, fears of the economic contraction and worsening coronavirus (COVID-19) conditions tame the pair bulls.

Read: RBA: Likely that fiscal, monetary support will be required for some time

However, the upbeat performance of global equities, including those from China, favors the AUD/USD buyers as they near a monthly top around 0.7000 threshold.

Market’s risk-tone sentiment remains mildly positive as shares in China cheer hints of further stimulus, nearness of the virus vaccine. Even so, Beijing’s state media Securities Times asks stock market traders to be rational. Elsewhere, pandemic data from Victoria and the US have been disappointing while the US-China tension over Hong Kong questions the optimists. Furthermore, Reuters relies on a letter signed by over 40 trade associations and sent to US Treasury Secretary Steven Mnuchin, Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He to highlight the American push to China for more purchases under phase one deal.

Amid all these catalysts, the US 10-year Treasury yields declined one basis point (bp) to 0.67%, whereas Australia’s ASX 50 follows Chinese stocks to flash 0.50% gains. Additionally, the S&P 500 Futures trims the early-day gains to print 0.30% loss by the press time.

Having witnessed the initial market reaction to the RBA’s action, actually inaction, the traders may keep eyes on the key risk catalysts for immediate direction. In doing so, the pandemic updates, China stock performance and the Sino-American tussle might gain priority. It should also be noted that the US economic calendar lacks any major data/event too, except for the US JOLTS Jobs Openings, expected 4.85M versus 5.046M, which in turn could keep the qualitative factors in the driver’s seat.

Technical analysis

Failure to stay strong beyond the mid-June top surrounding 0.6975 takes clues from MACD and RSI conditions to highlight 21-day SMA near 0.6905. Meanwhile, 0.7000 threshold keeps challenging the bulls ahead of the multi-month high of 0.7065, flashed on June 10.