AUD/USD recovers losses, turns flat near 0.7220 as DXY edges down to 95

The AUD/USD pair edged down toward the 0.72 handle in the early European session and found support there to retrace its losses. As of writing, the pair was virtually unchanged on the day at 0.7222.

The pair's price action on Monday seems to be driven by the dollar's market valuation. After closing the previous week on a positive note above the critical 95 mark on Friday, the US Dollar Index spent the majority of the day fluctuating in a narrow band above that level. However, a sharp upsurge seen in the GBP/USD pair in the last minutes weighed on the demand for the buck and the DXY turned negative on the day. At the moment, the index is down 0.07% on the day at 95.07.

In the NA session today, the ISM and the IHS Markit will release their final Manufacturing PMI reports for September. Participants expect the IHS Markit's PMI to stay unchanged at 55.6 while seeing the ISM PMI retreating to 60.3 from 61.3.

On Tuesday, the RBA is going to announce its interest rate decision and publish its monetary policy statement. “The Aug and Sep statements were virtually identical and we see no reason for the RBA to deviate from the script,” TD Securities analysts said in a recently published report and added:

“Recent data has confirmed the RBA's optimism - Annual GDP in Q2 expanded at the fastest pace in 6 years and the RBA's alternative measure of unemployment, the underutilisation rate, fell to 5yr lows. US-China trade tensions and consumption remain ongoing uncertainties.”

Technical levels to consider

The initial support for the pair aligns at 0.7200 (psychological level/daily low/20-DMA) ahead of 0.7140 (Sep. 18 low) and 0.7080 (Sep. 11 low). On the upside, resistances are located at 0.7250 (50-DMA), 0.7315 (Sep. 26 high) and 0.7345 (200-DMA).