AUD/USD keeps the red below 0.6500 mark, weaker USD/risk-on offers some support

• AUD/USD continues to be weighed down by the RBA’s smaller than expected 25 bps rate hike.
• The prevalent USD selling bias offers some support to the major and helps limit the downside.
• Retreating US bond yields and the risk-on mood is seen weighing on the safe-haven greenback.

The AUD/USD pair struggles to capitalize on its intraday move up to over a one-week high and meets with a fresh supply near the mid-0.6500s on Tuesday. The pair maintains its offered tone through the early North American session and is currently placed around the 0.6475 area, just a few pips above the daily low.

The Australian dollar continues to be weighed down by the fact that the Reserve Bank of Australia (RBA) delivered a dovish surprise and lifted the cash rate by 25 bps. The increase was smaller than the 50 bps already priced in the markets and disappointed investors, which, in turn, is seen as a key factor weighing on the AUD/USD pair.

The downside, however, remains cushioned, at least for the time being, amid the prevalent selling bias surrounding the US dollar. The US Treasury bond yields prolong their recent pullback from a multi-year high touched last week. This, along with the risk-on impulse, undermines the safe-haven buck and benefits the risk-sensitive aussie.

Despite the supporting factor, the AUD/USD pair, so far, has been struggling to attract any meaningful buying. This, in turn, suggests that the path of least resistance for spot prices is to the downside. Hence, some follow-through weakness back below the 0.6400 mark, towards retesting the YTD low near the 0.6365 area, remains a distinct possibility.

Next on tap is the US economic docket, featuring JOLTS Job Openings and Factory Orders data. This, along with speeches by influential FOMC members and the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities.

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