- Reserve Bank of Australia cuts the policy rate by 25 basis points on Tuesday.
- US Dollar Index struggles to build on Monday’s gains.
- Coming up: Building permits and trade balance data from Australia.
The AUD/USD pair recovered a large part of Monday’s losses but failed to climb above the 0.70 mark. As of writing, the pair was trading at 0.6988, adding 0.35% on a daily basis.
Earlier today, the Reserve Bank of Australia announced its decision to bring the policy rate to a record low of 1% from 1.25%. However, the fact that this move was already priced in allowed a classic ‘buy the rumour sell the fact’ price action and allowed the AUD to gain traction.
Commenting on the bank’s decision and the policy statement, “The Bank essentially kept the last paragraph from its June statement, but made a small tweak indicating it could adjust monetary policy ‘if needed’. This suggests the RBA is willing to cut the cash rate further,” said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.
Meanwhile, following Monday’s rally, the US Dollar Index lost its momentum amid a lack of fresh fundamental drivers and the sharp drop seen in the Treasury bond yields and allowed the pair to push higher. While the 10-year T-bond is losing more than 2.5% below the critical 2% mark, the DXY is down 0.1% on the day at 96.70.
In the early trading hours of the Asian session, building permits and the trade balance data from Australia will be looked upon for fresh impetus.
Technical levels to watch for
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