AUD/USD stays quiet around mid-0.73s ahead of RBA meeting

The AUD, which suffered heavy losses on rising trade war concerns in the last couple of months due to Australi's economic ties to China, rebounded strongly on Monday after the U.S. President Trump and Chinese President Xi agreed to a 90-day ceasefire following their meeting at the G20 summit in Buenos Aires. After starting the week with a 60-pip bullish gap, the AUD/USD pair touched its highest level since early August at 0.7393 before going into a consolidation phase in the NA session. As of writing, the pair was trading at 0.7353, adding 0.65% on a daily basis.

With the greenback struggling to find demand in the risk-on environment, the US Dollar Index fell to 96.70 earlier in the day to give an extra boost to the pair. Despite mixed PMI data reading from the U.S., however, the index recovered to the 97 area in the second half of the day and has been moving sideways near that level since. 

• US: Markit Manufacturing PMI falls to 55.3 vs 55.4 expected.
• US: ISM Manufacturing PMI rises to 59.3 vs 57.5 expected.

During the Asian trading hours on Tuesday, the RBA is going to announce its interest rate decision and publish the monetary policy statement. Although markets expect the bank to keep the policy rate unchanged at 1.5%, investors will be paying a close attention to the tone the bank adapts in its publication.

Previewing the event, "Since the RBA's November statement the housing-related data has been weak. Wages have been in line with expectations. And employment and forward expectations for capex have been solid. Global news has been negative, including wider credit spreads and lower oil prices. Together these won't be enough to shift the RBA from its positive outlook, but may see some caution enter the Bank's commentary,” argued ANZ analysts.

Technical levels to consider

The initial support for the pair aligns at 0.7345 (200-DMA) ahead of 0.7270 (20-DMA) and 0.7200 (psychological level/100-DMA). On the upside, resistances could be seen at 0.7390 (daily high), 0.7450 (Aug. 9 high) and 0.7500 (psychological level).