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  • Following the initial reaction to US tariffs, AUD recovers on Tuesday.
  • RBA paints an optimistic picture in its monetary policy statement.
  • DXY stays in the red a little below 94.50.

With the initial reaction to the United States’ announcement of 10% tariffs on $200 billion worth of Chinese imports, the AUD/USD pair fell below 0.7150 in the early Asian session. However, the upbeat tone seen in the RBA’s monetary policy statement helped the AUD gather strength against its rivals and the pair broke above the 0.72 mark. As of writing, the pair was trading at 0.7202, adding 0.26% on the day.

In its monetary policy statement, the RBA said that although the board agreed that there was no strong case for a move in interest rates in the near-term, the next rate move in rates would likely be upward in the economy developed as expected. Commenting on the U.S. – China trade conflict, the RBA stated that trade tensions were a “material risk” to the outlook. Regarding the AUD’s market valuation, the bank argued that a modest fall in the AUD was helpful for the economy.

On the other hand, amid a lack of significant macroeconomic data releases, the greenback stays in the negative territory below mid-94s and helps the pair preserve its daily gains. At the moment, the DXY is down 0.2% on the day at 94.34.

Later in the day,  the Melbourne Institute will publish the Westpac Leading Index and the RBA assistant Governor Kent will be delivering a speech.

Technical levels to consider

The pair could face the first technical resistance  at 0.7230 (Sep. 13 high) ahead of 0.7300 (50-DMA) and 0.7380 (Aug. 21 high). On the downside, supports are located at 0.7140 ((sep. 5 low), 0.7090 (Sep. 12 low) and 0.7000 (psychological level).

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