AUD/USD keeps the red despite upbeat China PMI, focus remains on RBA decision

• AUD/USD drifts lower for the second straight day, though lacks follow-through selling.
• A softer risk tone is seen as a key factor undermining the risk-sensitive Australian Dollar.
• The better-than-expected release of China Caixin Services PMI does little to impress bulls
• Dovish Fed hopes undermine the USD and lend some support ahead of the RBA decision.

The AUD/USD pair remains under some selling pressure for the second straight day on Tuesday and reacts little to the better-than-expected release of Chinese data. Spot prices currently trade around the 0.6615-0.6610 region, down less than 0.10% for the day, as traders keenly await the Reserve Bank of Australia (RBA) policy decision.

A private survey showed that business activity in China's services sector grew at a faster pace in November. China's Caixin Services PMI accelerated to 51.5 during the reported month from 50.4 in October, beating expectations for a reading of 50.8. This, however, does little to influence the AUD/USD pair or provide any meaningful impetus amid a generally softer risk tone, which tends to undermine the risk-sensitive Australian Dollar (AUD).

Meanwhile, dovish Federal Reserve (Fed) expectations keep a lid on the recent US Dollar (USD) recovery from a multi-month low. This, in turn, helps limit the downside for the AUD/USD pair ahead of the key central bank event risk. The RBA is widely expected to keep interest rates on hold. Hence, investors will look for cues about future rate hikes, amid some stickiness in Australian inflation, before placing fresh directional bets around the major.

Later during the early North American session, traders will take cues from the release of the US ISM Services PMI. This, along with the US bond yields and the broader risk sentiment, will drive demand for the safe-haven buck and allow traders to grab short-term opportunities around the major.

Technical levels to watch