AUD / USD declines to the 0.7380 zone after an initial rally above 0.7400

• The RBA kept its official interest rate and reduction plan unchanged in July.
• The US Dollar Index struggles to stay above 92.00 on Tuesday.
• The major US stock indices appear to open modestly higher.

The pair AUD/USD gained traction during Asian business hours and rose to a daily high of 0.7408 before entering a consolidation phase. At time of writing, the pair was up 0.33% on the day at 0.7383.

RBA’s policy outlook lifts AUD on Tuesday

Following its July policy meeting, the Reserve Bank of Australia (RBA) left its policy rate unchanged at 0.1% as expected. Regarding its bond purchase program, the RBA reiterated that it will reduce purchases in September despite the uncertainty caused by the increase in coronavirus cases and provided a boost to the AUD.

In evaluating the RBA’s policy statement, “the RBA appears to be looking at the current delta rupture in NSW and notes that ‘the experience to date has been that once virus outbreaks are contained, the economy recovers quickly ‘and that’ some increase in unemployment is expected to rate in the short term due to the current lockdowns, but most of the adjustment in the labor market is likely to take place through a reduction in hours worked and participation, ”Westpac analysts said.

On the other hand, the US Dollar Index (DXY), which closed flat above 92.00 on Monday, is declining Tuesday and helping AUD / USD stay in positive territory. Ahead of June factory orders and IBD / TIPP Economic Optimism Index data, the DXY is down 0.12% on the day to 91.96.

Meanwhile, the major Wall Street indices are still on track to open modestly higher on Tuesday. Should risk flows continue to dominate financial markets, the DXY could struggle to make a rally.

Technical levels