AUD/USD continues to erase RBA-inspired gains, edges lower toward 0.70

• RBA keeps policy unchanged to boost the AUD.
• China’s Liu confirms that he will be travelling to Washington.
• US Dollar Index stays calm near mid-97s.

The AUD/USD pair jumped to a weekly high of 0.7048 in the Asian session after the Reserve Bank of Australia (RBA) announced its decision to keep the policy rate unchanged at 1.5%. However, the pair struggled to preserve its strength and started to retrace its rally. Nevertheless, the pair was still up 0.42% on the day at 0.7018 as of writing.

The disappointing inflation and employment data from Australia caused speculations about the RBA possibly going for a rate cut in May. The fact that the bank left its official cash rate unchanged at 1.5% helped the AUD gain traction. Commenting on the bank’s decision, “Firstly, the RBA’s response to the recent March quarter inflation report was not as negative as had been expected,” Westpac analysts said.

“The second issue of importance was the Board’s noting in the April meeting minutes that “members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances.”

Additionally, Chinese Vice-Premier Liu He earlier in the day confirmed that we will be in Washington on Thursday and Friday for a fresh round of trade talks and revived optimism to help the pair push higher.

However, it’s still unclear if China will actually give in to the U.S. demands. In fact,  China’s Foreign Ministry Spokesperson Geng Shuang today said that he hoped that the U.S. will meet China “halfway” on trade negotiations and reiterated that raising tariffs won’t be solving any issues, causing the optimism to fade away.

Later in the day, the IBD/TIPP’s Economic Optimism Index from the U.S. will be looked upon for fresh impetus. At the moment, the US Dollar Index is moving sideways near the 97.50 mark.

Technical levels to consider

The pair could face the initial resistance at 0.7050 (daily high) ahead of 0.7090 (50-DMA) and 0.7130 (Apr. 8 high). On the downside, supports are located at 0.70 (psychological level), 0.6975 (daily low) and 0.6960 (May 6 low).