AUD/USD keeps the red below 0.6400 amid stronger USD, focus shifts to RBA on Tuesday

• AUD/USD turns lower for the third successive day amid strong follow-through USD buying.
• Elevated US bond yields and the risk-off mood offer support to the safe-haven greenback.
• The downside seems cushioned as traders now look to the RBA policy meeting on Tuesday.

The AUD/USD pair attracts fresh sellers following an early uptick to the 0.6425-0.6430 region and turns lower for the third successive day on Monday. The pair remains on the defensive through the early North American session and is currently placed near a four-day low, around the 0.6375-0.6370 region.

A combination of supporting factors assists the US dollar to capitalize on last week's late rebound from over a one-month low, which, in turn, is seen exerting downward pressure on the AUD/USD pair. The markets have fully priced in another supersized 75 bps rate hike at the end of a two-day FOMC monetary policy meeting on Wednesday. The expectations remain supportive of elevated US Treasury bond yields, which, along with a softer risk tone, underpins the safe-haven greenback.

The disappointing release of the Chinese Manufacturing PMI further fuels worries about a deeper global economic downturn and takes its toll on the risk sentiment. Furthermore, investors remain concerned about the potential economic headwinds stemming from the resurgence of COVID-19 cases in China. This turns out to be another factor weighing on the growth-sensitive Australian dollar, though the downside remains cushioned ahead of this week's key central bank event risks.

The Reserve Bank of Australia is scheduled to announce its policy decision during the Asian session on Tuesday. Last week's stronger domestic consumer inflation figures all but confirmed another 50 bps rate hike by the RBA and hence, the focus will be on the accompanying policy statement. The focus, however, will remain on the outcome of the highly-anticipated FOMC meeting on Wednesday. This will play a key role in determining the next leg of a directional move for the AUD/USD pair.

Technical levels to watch