AUD/USD: Rally falters at 0.6450 after RBA Lowe’s comments

• AUD/USD is paring back gains as RBA Lowe fails to impress.
• The dovish RBA rate hike did little to deter AUD bulls amid China-led risk flows.
• All eyes now remain on the US ISM, Australian housing data and the Fed decision.

AUD/USD is consolidating the latest leg higher above 0.6400, as the rally faltered at 0.6450 following the dovish remarks from the Reserve Bank of Australia (RBA) Governor Philip Lowe. The central bank chief said that the “board has judged it appropriate to raise rates at a slower pace,” adding that “We are taking into account pressure of higher rates, inflation on household budgets.”

Earlier this Tuesday, the central bank hiked the policy rate by 25 bps from 2.60% to 2.85%, as widely expected while revising down its growth projections for 2022 and the next two years. The aussie briefly reversed towards 0.6400 on the RBA announcements but eventually caught a fresh bid wave, as the US dollar lost further ground amid a risk rally on Chinese indices.

Chinese tech stocks rallied and led the broader indices sharply higher after unconfirmed reports began to float on social media that policymakers were making preparations to gradually exit the stringent covid-Zero policy. The risk-sensitive aussie rallied in tandem with China markets while also capitalizing on the upbeat Caixin Manufacturing PMI, which arrived at 49.2 in October vs. 49.0 expected.

Meanwhile, markets are resorting to re-positioning on their US dollar longs ahead of the all-important Fed rate hike decision due on Wednesday. The resultant dollar weakness is helping the pair stay afloat comfortably above 0.6400, despite the renewed downtick.

Later in the day, investors will look forward to the US ISM Manufacturing PMI and the price paid component for fresh dollar trades while the sentiment on Wall Street will also play a pivotal role. Also, of note remains the Australian Building Permits data due for release on Wednesday for fresh trading incentives. However, the main event risk this week remains the Fed verdict.

AUD/USD: Technical levels to consider