Forex Today: RBA leaves rates on hold, US Dollar stabilizes on July 4th

Here is what you need to know on Tuesday, July 4:

The Reserve Bank of Australia (RBA) went against the market expectation and left its policy rate unchanged following the July policy meeting. Meanwhile, the US Dollar holds its ground early Tuesday after having weakened against its rivals following the disappointing ISM Manufacturing PMI survey on Monday. There won't be any high-impact data releases and trading action is likely to stay subdued with US stock and bond markets remaining closed in observance of the Independence Day holiday.

The RBA announced early Tuesday that it held the Official Cash Rate (OCR) unchanged at 4.10%. The latest Reuters poll showed there was a near split among economists, with 16 of 31 forecasting another 25 bps rate hike to 4.35%. In its policy statement, the RBA reiterated that "some further tightening of the monetary policy may be required" and explained that any tightening will depend on how the economy and inflation evolve. With the initial reaction, AUD/USD lost nearly 50 pips and dropped below 0.6650 before staging a rebound. At the time of press, the pair was trading flat on the day near 0.6670.

The economic activity in the US manufacturing sector continued to contract at an accelerating pace in June, the ISM Manufacturing PMI survey revealed on Monday. The headline ISM Manufacturing PMI fell to 46 from 46.9 in May and came in weaker than the market expectation of 47.2. Further details of the publication revealed that the Employment Index fell to 48.1 and the inflation component, Prices Paid Index, dropped to 41.8 from 44.2. The US Dollar Index erased its daily gains after this data and went into a consolidation phase near 103.00.

EUR/USD failed to make a decisive move in either direction on Monday. Early Tuesday, the pair continues to fluctuate in a tight channel at around 1.0900.

GBP/USD extends its sideways grind near 1.2700 for the second straight day on Tuesday. 

Crude oil prices edged higher on Monday after Saudi Arabia said that it will extend the voluntary oil output cut of one million barrels per day by one more month to include August. After rising toward $72, the barrel of West Texas Intermediate retreated toward $70 area with the disappointing US ISM PMI report reviving concerns over the demand outlook.

USD/CAD holds steady above 1.3200 on Tuesday. Later in the day, the Bank of Canada will release the Business Outlook Survey for the second quarter.

USD/JPY moves up and down in a narrow channel below 145.00 on Tuesday. Japanese Finance Minister Shunichi Suzuki said earlier in the day that he is “keeping in close contact with the US at the vice-ministerial level on FX.” Similarly, "We are exchanging views with and communicating with authorities in other countries including our ally the United States not only on currencies, financial markets but various other issues," Japan's top currency diplomat Masato Kanda told reporters.

Gold staged a rebound amid retreating US yields on Monday and closed the day modestly higher. XAU/USD stays in positive territory above $1,920 early Tuesday.

Bitcoin gathered bullish momentum and climbed to $31,000 area before staging a technical correction early Tuesday. Ethereum rose above $1,900 on Monday and seems to have stabilized there in the European morning.