AUD / USD rises above 0.7800 as DXY moves away from multi-week highs

• AUD / USD gained traction after falling to the 0.7750 zone.
• The RBA left its policy rate unchanged at 0.1% as expected.
• The US dollar index erased most of the daily gains ahead of the US session.

The pair AUD/USD it remained relatively quiet for the first half of the day and traded in a relatively tight range around 0.7750. However, with the USD beginning to lose steam ahead of the US session, the pair gained traction and was last seen rising 0.43% on the day at 0.7803.

Earlier in the day, the Reserve Bank of Australia (RBA) left its policy rate unchanged at 0.1% as expected. In its policy statement, the RBA noted that it will not increase the policy rate until inflation is sustainably kept within the 2-3% target range. Additionally, the RBA reiterated that it is prepared to make adjustments to its asset purchases in response to changing market conditions. However, market reaction remained relatively subdued.

DXY moves away from highs as risk flows return

On the other hand, the US dollar index continued to climb after closing in positive territory on Monday and hit its best level in nearly a month at 91.39 on Tuesday before losing momentum. At the moment, the DXY is up 0.1% to 91.13.

In the absence of major macroeconomic data releases, an observed positive shift in market sentiment appears to be making it difficult for the dollar to remain strong. Reflecting the improving market sentiment, the German DAX and the UK FTSE 100 indices gain around 0.6%. Also, the S&P 500 Futures, which was down 0.5% earlier in the day, is now losing 0.2%.

Later in the session, data from the ISM-NY Trade Conditions Index and the US IBD / TIPP Economic Optimism Index will be scrutinized for new catalysts.

Technical levels