AUD/USD sticks to RBA-inspired gains, lacks follow-through beyond 0.7400 mark

The AUD/USD pair maintained its bid tone through the first half of the European session, albeit has retreated around 25 pips from daily swing highs. The pair was last seen trading just below the 0.7400 mark, still up over 0.35% for the day.

Following a brief consolidation during the early part of the trading action on Tuesday, the AUD/USD pair caught some fresh bids after the Reserve Bank of Australia (RBA) announced its policy decision. Despite concerns about the economic impact of rising coronavirus cases, the RBA stuck with its plan to taper its bond-buying programme and provided a goodish lift to the Australian dollar.

Apart from this, a softer tone surrounding the US dollar further acted as a tailwind for the AUD/USD pair for the second consecutive session. In fact, the key USD Index languished near one-month lows amid expectations that the Fed will retain its ultra-lose monetary policy stance for a longer period. This, along with the risk-on impulse in the markets, undermined the safe-haven greenback.

However, a goodish rebound in the US Treasury bond yields helped limit any deeper losses for the USD. This, in turn, kept a lid on any further gains for the AUD/USD pair, which, so far, has been struggling to capitalize on its move beyond the 0.7400 mark. Hence, it will be prudent to wait for some follow-through buying before positioning for any further appreciating move.

There isn't any major market-moving economic data due for release from the US on Tuesday, leaving the USD at the mercy of the US bond yields. Traders might further take cues from the broader market risk sentiment, which will influence the perceived riskier aussie and produce some short-term trading opportunities around the AUD/USD pair.

Technical levels to watch