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  • A softer risk tone benefitted the safe-haven USD and exerted some pressure on AUD/USD.
  • The downside remained cushioned after the RBA announced its monetary policy decision.
  • The RBA left interest rates/yield target unchanged at 0.10% and sounded a bit optimistic.

The AUD/USD pair bounced around 10-15 pips in reaction to the RBA policy decision, albeit lacked any follow-through buying. The pair was last seen trading just below mid-0.7600s, nearly unchanged for the day.

The pair struggled to capitalize on the previous day’s goodish move up and remained confined in a range through the first half of the trading action on Tuesday. A softer tone around the equity markets drove some haven flows towards the US dollar and kept a lid on any meaningful upside for the perceived riskier aussie.

The AUD/USD pair, for now, seems to have stalled its recent bounce from YTD lows near the 0.7660-65 region, though the downside seems cushioned, at least for the time being. The Australian dollar found some support after the Reserve Bank of Australia (RBA) announced its policy decision and decided to maintain the status quo.

As was universally expected, the RBA left the cash rate and the three-year government bond yield target at 0.1%. In the accompanying policy statement, the central bank sounded a bit optimistic and noted that the economic recovery is stronger than has been expected, which, in turn, provided a modest lift to the AUD/USD pair.

It will now be interesting to see if bulls are able to capitalize on the move or the AUD/USD pair’s inability to gain any meaningful traction suggests that the recent bounce has run its course. This makes it prudent to wait for a sustained move beyond the 0.7660-65 region before positioning for any further gains.

Technical levels to watch