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  • RBA’s upbeat tone helps AUD gather strength on Tuesday.
  • Wall Street’s main indexes extend rally, post strong gains.
  • US Dollar Index slumps to fresh five-day lows below 100.

After climbing above the 0.6200 handle during the European trading hours, the AUD/USD staged a technical correction and dropped to 0.6166 before regaining its traction. As of writing, the pair was up 1.9% on a daily basis at 0.6202.

The Reserve Bank of Australia’s relatively optimistic tone in its policy statement provided a boost to the AUD on Tuesday. After announcing that it kept its policy rate unchanged at 0.25% as expected, the RBA noted that a recovery in the global economy was expected once the coronavirus is contained. “If conditions continue to improve, it is likely that smaller and less frequent bond purchases will be required,” the RBA added.

USD selloff intensifies on Tuesday

On the other hand, the greenback struggles to find demand as risk-on flows continue to dominate financial markets for the second straight day on Tuesday. The US Dollar Index, which advanced to 100.93 on Monday, broke below the 100 mark during the American session to help the pair push higher.

Reflecting the upbeat market sentiment, Wall Street’s three main indexes are up between 1.7% and 2.7% while the 10-year US Treasury bond yield is adding 14%.

On Wednesday, Home Loans and Investment Lending for Homes data from Australia will be looked upon for fresh impetus. Later in the day, the FOMC will publish its monetary policy meeting minutes.

Technical levels to watch for