AUD/USD trims early Asian losses to eye 0.7800 after RBA’s status-quo

• AUD/USD picks up bids from intraday low even as RBA stands pat.
• RBA keeps benchmark interest rate, bond purchase target unchanged, holds on to dovish view of employment market.
• Market sentiment dwindles amid a lack of major catalysts likely geopolitical challenges, Brazilian covid fears.
• US stimulus, virus/vaccine updates will entertain traders ahead of Wednesday’s Aussie GDP.

AUD/USD bounces off intraday low, to currently around 0.7770, while trimming the day’s losses to 0.17% the latest after the RBA rate decision on early Tuesday. The pair earlier witnessed downside pressure over consolidation in the market’s risk-tone. However, the recent recovery in the AUD/USD seems to have taken clues from the RBA statements.

While holding benchmark rates unchanged at 0.10%, coupled with no change in the 3-year yield target, the Reserve Bank of Australia (RBA) failed to offer any fresh policy directive in its latest meeting in March. However, the Aussie central bank’s readiness to pump the bond market and rejection to rate hike seems to have favored the AUD/USD bulls off-late.

Read: RBA: Will not increase the cash rate until actual inflation is sustainably within the 2-3% target range

AUD/USD has been depressed since early Asia as market players lacked the motivation to extend Monday’s recovery moves. The sober sentiment gained strength after US President Joe Biden’s pick for the US Trade Representative (USTR) Katherine Tai conveyed bias for China. Further, American readiness to levy fresh sanction on Russia, for the poisoning of Kremlin critic Alexi Navalny, also probe the risks.

Furthermore, fears of the Brazilian variant of the coronavirus (COVID-19) as well as cautious sentiment ahead of the much-awaited US covid stimulus, as well as the UK budget, also test the bulls.

It should additionally be noted that the central bankers around the globe have recently been able to divert market attention from the reflation. However, it's just under the carpet and can pop-up if the bond bears keep the reins.

Against this backdrop, S&P 500 Futures reverse initial gains to drop 0.40% whereas Australia’s ASX 200 remains mostly unchanged around 0.15% intraday by press time. Even so, the US 10-year Treasury yields remain on the back foot, currently declining 4.1 basis points (bps) to 1.40%.

Given the challenges to the risks, coupled with the RBA’s inability to entertain markets, AUD/USD remains at the mercy of macro catalysts. As a result, the pair traders will keep their eyes on the US covid stimulus headlines as US President Joe Biden’s $1.9 trillion plan reaches the Senate. Also important will be the COVID-19 and vaccine updates. Though, major attention will be given to Wednesday’s Australia’s GDP figures for Q4, expected 2.5% QoQ versus 3.3% prior.

Technical analysis

Failures to extend corrective pullback from 50-day EMA suggest the return of the 0.7700 threshold on the chart. However, any further weakness will not refrain from challenging the support line from December 21, at 0.7631 now. Meanwhile, a 21-day EMA around 0.7775 guards the quote’s immediate upside.