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  • Expectations that RBA will cut rates on Tuesday continues to weigh on the Aussie.
  • Cautious mood benefitted the USD’s safe-haven status and adds to the pressure.
  • Mixed trade-related headlines did little to impress bulls or provide any respite.

The AUD/USD pair held on to its weaker tone through the early European session on Monday and remained well within the striking distance of multi-week lows set last week.
The pair failed to capitalize on Friday’s attempted recovery move and met with some fresh supply at the start of a new trading week amid firming expectations that the RBA will deliver a 25bps rate cut at its upcoming meeting on Tuesday.

Risk-on mood/dovish RBA expectations continue to weigh

On the other hand, the prevalent cautions extended some support to the US Dollar’s relative safe-haven status and further collaborated towards driving flows away from perceived riskier currencies – like the Australian Dollar.
Moreover, mixed trade-related headlines did little to lend any support to the China-proxy Australian Dollar or assist the pair to register any meaningful recovery ahead of the high-level US-China trade negotiations in October.
It is worth mentioning that reports suggested that the US Administration is looking to restrict capital flows into China and to limit Chinese companies from trading on the US exchanges, though was later denied by the US Treasury officials.
Meanwhile, Monday’s slightly better-than-expected release of Chinese manufacturing PMI passed unnoticed, which clearly indicates that investors are likely to refrain from placing any aggressive bets ahead of Tuesday’s key event risk.
In the meantime, the USD price dynamics, the broader market risk sentiment and any incoming trade-related headlines might continue to act as key determinants of the pair’s momentum on the first day of a new week.

Technical levels to watch