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  • AUD/USD turned south after starting the day on a firm footing.
  • Broad USD strength is making it tough for AUD/USD to gain traction.
  • RBA left its policy rate unchanged as expected but extended QE.

The AUD/USD pair edged higher during the early Asian trading hours but reversed its direction ahead of the European session and fell to 0.7600 area. Although the pair staged a rebound following that drop, it struggled to gather momentum and was last seen losing 0.16% on the day at 0.7607.

RBA’s dovish shift weighs on AUD

On Tuesday, the Reserve Bank of Australia (RBA) announced that it left its policy rate unchanged at 0.1% as expected. On a dovish note, the RBA said that it will start purchasing an additional AUD100 billion worth of bond from mid-April and triggered an AUD selloff.

Commenting on the market reaction, “with today’s dovish outcome plus continued weakness across the metals complex – especially iron ore; weaker China activity data and the recent jump in the China repo rate, we see some further underperformance in the AUD/USD pair near term,” said Westpac analysts.

Meanwhile, the greenback preserves its strength for the second straight day despite the upbeat market mood. The US Dollar Index is currently at its highest level in nearly two months at 91.15, up 0.2% on a daily basis.

Later in the session, the ISM-NY Business Conditions Index and the IBD/TIPP Economic Optimism Index from the US will be looked upon for fresh impetus. On Wednesday, RBA Governor Phillip Lowe’s speech will be watched closely by market participants.

Technical levels to watch for