AUD/USD extends recovery towards 0.7000 as RBA praises yield targeting, Lowe eyed

• AUD/USD picks up bids to refresh intraday high, extends week-start recovery.
• RBA praises yield targeting method and mentioned reputational damage as it ended.
• Market sentiment remains mixed, US holiday allowed European/UK shares to improve.
• RBA Meeting Minutes, speech from Governor Lowe gain major attention ahead of the full markets.

AUD/USD renews intraday high around 0.6960, extending the daily gains as market sentiment remains cautiously optimistic ahead of multiple catalysts from the Reserve Bank of Australias (RBA), up for publishing on early Tuesday.

The Aussie pair’s latest gains could be linked to the absence of the US traders, due to the Juneteenth holiday, as well as the RBA’s comments on the success of the yield targeting method.

RBA conceded the end of yield target was damaging during early Tuesday morning in Asia. The Aussie central bank also mentioned, “Yield target successfully reinforced the bank's forward guidance about the cash rate.”

Also read: RBA: Yield target successfully reinforced the bank's forward guidance about the cash rate

It’s worth noting that the RBA surprised markets with 50 basis points (bps) rate hike during its latest monetary policy meeting and the tide for a rate lift isn’t down yet. Hence, the AUD/USD traders will be more interested in reading about the future rate actions and/or possible monetary policy moves discussed by the policymakers. The same highlights today’s RBA Meeting Minutes for the last meeting. Also important will be a speech from RBA Governor Philip Lowe.

On the other hand, the US Dollar Index (DXY) began the week on a negative side as an off in the US markets allowed stocks/bunds in Europe and the UK to consolidate recent moves. Even so, fears of monetary policy aggression and economic fears challenged the market’s optimism amid a lackluster day.

Moving on, RBA’s Lowe and Meeting Minutes will be crucial for the AUD/USD traders ahead of the second-tier US data. Additionally, chatters surrounding the likely US tax relief to China and covid may also entertain the pair traders. Above all, Federal Reserve (Fed) Chairman Jerome Powell’s Testimony on the bi-annual Monetary Policy Report, on Wednesday and Thursday, will be important for clear directions.

Technical analysis

AUD/USD grinds higher between the weekly support line and the 10-DMA, respectively around 0.6930 and 0.7000.