AUD/USD sees upside above 0.6830 as DXY corrects, RBA policy and Fed minutes in focus

• AUD/USD is likely to extend its recovery above 0.6830 amid a weaker DXY.
• The FOMC minutes will display the agenda behind featuring a 75 bps rate hike in June.
• A consecutive 50 bps rate hike by the RBA is expected in July monetary policy meeting.

The AUD/USD pair is looking strong at open and is expected to extend its recovery after violating the critical hurdle of 0.6830. On Friday, the asset witnessed a strong rebound as the greenback bulls sensed exhaustion after failing to extend losses below 0.6763. A firmer recovery drove the asset above the psychological resistance of 0.6800 to a high of 0.6828 and more gains are expected from the counter on advancing downside risks for the US dollar index (DXY).

The DXY witnessed a steep fall after re-testing the year high at 105.79. Investors found the DXY an expensive bet at elevated levels after the release of the downbeat US Institute of Supply Management (ISM) data. The US ISM Manufacturing PMI landed at 53, lower than the expectations of 54.9 and the prior print of 56.1.

In addition to that, the Employment Index and New Orders Index remained vulnerable. So the all-together downbeat performance trimmed the odds of a consecutive 75 basis point rate hike announcement by the Federal Reserve (Fed) for its July monetary policy meeting.

This week, the release of the Federal Open Market Committee (FOMC) minutes will keep investors busy.  The FOMC minutes will provide a detailed view of the agenda behind keeping an extreme hawkish stance on policy rates by the Fed in June.

On the aussie front, the spotlight will remain on the interest rate decision by the Reserve Bank of Australia (RBA), which is due on Tuesday. The RBA is expected to announce a consecutive 50 basis points (bps) rate hike in its monetary policy. This may elevate its Official Cash Rate (OCR) officially to 1.35%.