AUD/USD holds gains ahead of RBA decision

• AUD/USD traded in a 55-pip range on Monday and held to daily gains.
• The USD weakened after the release of US ISM Manufacturing PMI from June.
• RBA’s decision to be the highlight of the early Asian session.

The AUD/USD maintained its upward momentum and traded within a range of 0.6691 to 0.6636. The US dollar faced weakness following the release of the June Institute Supply Management (ISM) Manufacturing PMI data while market participants await the Reserve Bank of Australia (RBA) decisions. The central bank is expected to raise rates to 4.35%.

The AUD traded with gains against most of its rivals ahead of the RBA decision

Ahead of the RBA decision in the early Asian session on Tuesday, the Aussie strengthened against most of its rivals. In that sense, it gained ground against the USD, EUR, GBP, JPY and CHF while investors await an announcement of a 25 basis points (bps) hike. However, according to a Reuters poll, economists expect this decision to be a close call as falling inflation supports a dovish decision. Still, the surprise hike in early June opens the door for another hike.

On the other hand, the USD lost traction after the June ISM Manufacturing PMI fell below expectations and the previous reading. With a reading of 46, it came in lower than the anticipated 47.2 and the previous figure of 46.9. Eyes are now on labour data to be released Thursday and Friday, including June’s Non-Farm Payrolls and ADP Employment change figures.

AUD/USD Levels to watch

According to the daily chart, the technical outlook for the AUD/USD is neutral as indicators turned flat and seem to await a catalyst to determine short-term trajectory. That said, traders should eye 0.6700, where the 200- and 100-day Simple Moving Average (SMA) are about to perform a bullish cross.

Resistance levels: 0.6693 (200-day SMA), 0.6720, 0.6730 (20-day SMA).
Support levels: 0.6640, 0.6600, 0.6595.

AUD/USD Daily chart