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  • AUD/USD bulls hold the baton after flashing the biggest daily gains since March 2017.
  • Broad US dollar weakness, risk-on sentiment favored the Aussie dollar.
  • US President Donald Trump’s refrain from punishing China, civil unrest in America acted as the main catalysts.
  • RBA is widely anticipated to keep the current monetary policy unchanged.

Having dominated the markets at the week’s start, AUD/USD bulls keep the reins around 0.6810, high of 0.6814, at the beginning of Tuesday’s Asian session. The Aussie pair extends the previous day’s gains amid broad US dollar weakness and the market’s optimism amid US President Donald Trump’s no fresh sanctions on China during Friday’s conference. Riots in the US and downbeat US data are an additional burden on the greenback. Moving on, monetary policy meeting by the Reserve Bank of Australia (RBA) acts as the key catalysts in Asia.

Did Trump trigger optimism or is it weak USD?

There are varied concerns upon whether the recent surge of the AUD/USD pair is backed by the US President Donald Trump’s absence of punitive action of the weak US dollar performance. If we observe Friday’s China conference by the Republican leader, worrisome comments couldn’t be ignored and there were hidden threats used. Hence, the US leader hasn’t forgiven China for its rush to power in Hong Kong.

On the other hand, the US dollar weakness could be a more suited reason for the Aussie pair’s run-up. In addition to the US-China story, hopes of economic restart and expectations of the further stimulus also propelled the market’s risk-tone sentiment, which in turn weighed on the USD’s safe-haven demand. Additionally, soft ISM Manufacturing PMI, 43.1 versus 43.6 forecast, also exerted downside pressure on the US currency.

Amid all these catalysts, the US 10-year Treasury yields gained 2.3 basis points (bps) to 0.667% whereas Wall Street benchmarked flashed mild green signs by the end of their trading on Monday.

While the civil unrest in the US is getting worse, with New York recently announcing curfew, coupled with no major catalysts concerning America, the USD is more likely to remain on the back foot. However, major attention will be given to today’s RBA meeting for near-term AUD/USD moves. Even if the Aussie central bank isn’t expected to alter the monetary policy, not to mention the key interest rate, Governor Philip Lowe recently sounded upbeat and raised hopes of a positive statement. As a result, the Aussie pair may extend its run-up following the event.

Ahead of the RBA, the first quarter (Q1) Aussie Current Account Balance and Company Gross Operating Profits will offer intermediate clues to the markets.

Technical analysis

While overbought RSI keeps questioning the buyers, the early-January lows near 0.6850 are likely nearby resistance during the further upside. It should also be noted that the sellers are less likely to return to the desk unless witnessing a downside break of a 12-day-old support line around 0.6620.