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  • AUD/USD edged lower on Tuesday after the RBA announced its latest monetary policy decision.
  • A combination of factors helped limit the downside, rather assisted the pair to regain traction.
  • The upside is likely to remain limited amid the uncertainty about the outcome of US elections.

The AUD/USD pair managed to rebound over 50 pips from the post-RBA swing lows and spiked to daily tops, around the 0.7070 region during the early European session.

The pair witnessed some selling during the early part of the trading action on Tuesday after the Reserve Bank of Australia (RBA) slashed its official cash rate to a new historic low level of 0.1%. The RBA also announced to expand its bond-buying program by A$100 billion to prop up the Australian economy, which has been smashed by the coronavirus crisis.

However, the fact that the move was largely priced in, the immediate market reaction turned out to be short-lived. The AUD/USD pair attracted some dip-buying near the 0.7030-25 region and turn positive for the second straight session. The uptick assisted the pair to recover further from the lowest level since July 20, or sub-0.7000 levels touched in the previous session.

Despite concerns about the potential economic fallout from coronavirus-induced lockdowns in Western countries, the upbeat market mood undermined the US dollar’s safe-haven status and drove some flows towards the perceived riskier Australian dollar. The greenback was further pressured by the uncertainty over the actual outcome of Tuesday’s US presidential election.

It is worth mentioning here that the incoming opinion polls have been indicating a lead for Democrat challenger Joe Biden over incumbent President Donald Trump. However, the fight in key battleground states is very close, forcing investors to remain on the sidelines rather than betting outright on a particular result of the US election.

In the absence of any major market-moving economic releases from the US, investors’ focus will remain glued to political developments in the US. Heading into the key event risk, some repositioning trade might still infuse some volatility and assist traders to grab some meaningful opportunities.

Technical levels to watch