AUD/USD falls 50 points after RBA inaction

• AUD/USD falls to a new intraday low as the RBA remains unchanged for the second meeting in a row.
• The RBA delays rate hike trajectory, defying forecasts for a 0.25% hike, and holds benchmark rates at 4.1%.
• Mixed catalysts from China, bullish yields and caution ahead of second order US data also weigh on the pair.
• Friday’s RBA monetary policy statement and US NFPs will be crucial for clear guidance.

AUD/USD fell 50 points after the Reserve Bank of Australia’s (RBA) decision not to raise rates, extending early losses to around 0.6657 heading into the European session on Tuesday. However, the pair does not look set to go lower as markets await the US ISM manufacturing PMI for July and the JOLTS jobs open for June.

He RBA has defied market forecasts by keeping benchmark rates intact at 4.1% after challenging the two hawkish surprises at the last policy meeting in July. Thus, the Australian central bank renews the dovish bias on the AUD/USD pair, as it justifies previously released bearish Australian inflation data.

Aside from the RBA status quo, the strength of the Dollar Index and the bearish data from China, as well as the mixed sentiment, also weigh on the AUD/USD. That being said, the US Dollar Index (DXY) renews a three-week high as Treasury yields rally despite mixed US activity data released the day before. The reason for the latest rise in DXY and yields could be related to hawkish comments by Federal Reserve Bank of Chicago President Austan Goolsbee. In addition to dollar strength, the Aussie pair could be hit by fears of more US-China clashes as Beijing restricts drone exports in retaliation for tech and trade war tactics of the US, alleging “national security” measures.

Earlier in the day, China’s Caixin Manufacturing PMI for July eased to 49.2 for July from 50.5, coming in below the 50.3 expected by the market, marking the lowest level since January.

Elsewhere, S&P 500 futures are trailing Wall Street and posting slight gains at time of writing, while US 10-year and 2-year Treasury yields are rising.

Having witnessed the initial market reaction to the RBA moves, AUD/USD traders should keep an eye on catalyst risk for further momentum ahead of the US employment and activity data. If early signs from Friday’s US Non-Farm Payrolls (NFP) are positive, sellers of the Aussie pair may hold the reins.

AUD/USD Technical Analysis

The bounce of AUD/USD looks elusive unless it crosses the convergence of the previous May 31 support line and the 200 DMA, around 0.6730-35 at time of writing.