- AUD/USD reversed its direction after testing 0.7200 on Tuesday.
- US Dollar Index is clinging to small daily gains near 93.50.
- RBA left its policy rate unchanged at 0.25% as expected.
The AUD/USD pair spiked above 0.7200 in the early Asian session but spent the remainder of the day under constant bearish pressures. As of writing, the pair was down 0.4% on the day at 0.7150.
RBA’s dovish tone weighs on AUD
As expected, the Reserve Bank of Australia (RBA) announced that it left its policy rate unchanged at 0.25% at its October meeting. Although the initial market reaction allowed the AUD to gather strength its rivals, the dovish tone in the policy statement forced AUD/USD to reverse its course.
The RBA reiterated that it will not increase the policy rate until enough progress is made towards full employment and until it’s confident that inflation will sustain in the 2%-3% range. “The board continues to consider how additional monetary easing could support jobs as the economy opens up further,” the RBA added.
On the other hand, the greenback stays relatively resilient against its major rivals after starting the week on the back foot. With the US Dollar Index clinging to small daily gains near 93.50 in the American session, AUD/USD struggles to recover its losses.
Earlier in the day, FOMC Chairman Jerome Powell said the economic recovery in the US will be stronger and faster if the fiscal and monetary policies “work side by side.” On Wednesday, the FOMC will release the Minutes of its September meeting, at which the Fed adopted its updated forward guidance.
The only data from the US revealed on Tuesday that the Trade Balance in August fell to -$67.1 billion, compared to market expectation of $66.1 billion, but was largely ignored by the market participants.
Technical levels to watch for
Credit: FX Street