AUD/USD extends upside above 0.6700 ahead of RBA policy

• AUD/USD climbs quickly above 0.6700 as US Dollar comes under pressure.
• Expectations indicate that US manufacturing sector will continue its contracting spree straight for the ninth month.
• The Australian Dollar will dance to the tunes of the interest rate decision by the RBA.

The AUD/USD pair stretches its north-side move above the round-level resistance of 0.6200 in the late European session. The Aussie asset is swiftly moving higher as the US Dollar Index (DXY) retreats ahead of the United States ISM Manufacturing PMI data, which will be published on Tuesday.

S&P500 is expected to open on a positive note, following positive cues from overnight futures. US equities are consistently getting bids amid earnings season. The US Dollar comes under pressure as investors are discounting weak expectations from US factory data.

The US manufacturing sector has been contracting for the past eight months due to an aggressive rate-tightening cycle by the Federal Reserve (Fed). Firms have been postponing their expansion plans to avoid higher interest obligations.

According to the estimates, US factory orders are seen at 46.5 vs. the former release of 46.0. This indicates that the US manufacturing sector will continue its contracting spree straight for the ninth month. After the US Manufacturing data, investors will shift their focus to Employment data to be reported by Automatic Data Processing (ADP) on Wednesday.

Meanwhile, the Australian Dollar will dance to the tunes of the interest rate decision by the Reserve Bank of Australia (RBA), which will be announced on Tuesday. Economists at UOB Group believe that the RBA is aware that rates are “clearly restrictive”, and there is a chance they remain on pause at 4.10%. However, we look for a further 25bps rate hike, keeping in mind that inflation rates remain substantially above the RBA’s target band of 2-3%. The decision on Aug 1, will nonetheless, be a close call.