AUD/USD stays in red below 0.71 following modest rebound
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AUD/USD stays in red below 0.71 following modest rebound

  • RBA’s cautious tone weighs on the AUD.
  • Chinese data disappoints on Tuesday.
  • The US Dollar Index stays above 96.70.

The AUD/USD pair fell to its lowest level since February 12 at 0.7065 earlier today but was able to recover a small portion of its daily losses ahead of the U.S. data releases. As of writing, the pair was down 0.2% on the day at 0.7078.

Earlier today, the data from China showed that the service sector lost momentum in February with the Caisin Services PMI dropping to 51.1 from 53.6 in February to hurt the demand for antipodeans. Additionally, the RBA, which left the policy rate unchanged at 1.5% as expected, in its policy statement noted that the downside risks increased and trade tensions remained as a source of domestic uncertainty to make it difficult for the AUD to gain traction.

Commenting on the RBA’s statement, “The policy statement was surprisingly similar to last month, despite the Governor shifting from “next move is up” to “neutral” in a speech the next day. With the RBA Governor scheduled to speak early tomorrow on “Housing and the Economy”, it will be mandatory reading,” said TD Securities analysts.

On the other hand, the broad-based USD strength stayed intact for the fifth straight day on Tuesday and forced the pair to stay in the negative territory. Ahead of the Services PMI, new home sales, and the IBD/TIPP Economic Optimism Index data from the U.S., the DXY is clinging to modest gains at 96.75.

Technical levels to watch for

With a break below 0.7055 (Feb. 12 low), the pair could extend its losses toward 0.7000 (psychological level) and 0.6915 (Jan. 3 low). On the upside, resistances align at 0.7100 (daily high), 0.7155 (50-DMA) and 0.7195/0.7200 (Feb. 27 high/psychological level).

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