- AUD/USD pared early losses and turned flat near 0.7370.
- US Dollar Index continues to edge lower toward 92.00.
- RBA is widely expected to keep its policy rate unchanged.
The AUD/USD pair climbed to its highest level since December 2018 at 0.7382 during the Asian trading hours on Monday but struggled to preserve its bullish momentum. After retreating to 0.7340 area, however, the pair erased its losses and was last seen trading flat on the day at 0.7367.
Focus shifts to RBA
The broad-based USD weakness remains unabated at the start of the week. The US Dollar Index (DXY), which lost nearly 1% last week following the Fed's policy shift, touched its lowest level in more than 10 days at 92.15 on Monday. Nevertheless, the lack of fundamental drivers doesn't allow the DXY to make sharp movements in either direction.
During the early trading hours of the Asian session on Tuesday, the Reserve Bank of Australia (RBA) will publish its policy statement and announce its interest rate decision.
TD Securities analysts think that the RBA is likely to adopt a neutral stance with regards to policy outlook and expect AUD/USD to continue to move sideways 0.7400.
"The Bank is likely to indicate that the downturn has not been as bad as initially feared but for the recovery to be 'uneven and bumpy'. We anticipate the Bank is likely to indicate it's content with current policy settings," analysts explained. "With the Victorian Premier indicating a roadmap to exit lockdown to be detailed on 6 Sep, this should be news the RBA would welcome, reinforcing no need for the RBA to shift its current stance."
Technical levels to watch for
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