AUD/USD pulls away from daily highs, clings to small gains near 0.6440
- RBA left its policy rate unchanged at 0.25% as expected.
- USD gathers strength on Tuesday to keep the pair's gains limited.
- Trade Balance and ISM Non-Manufacturing PMI data from US coming up next.
The AUD/USD pair edged higher during the Asian session on Tuesday after the Reserve Bank of Australia (RBA) left its policy rate unchanged at 0.25%. However, the selling pressure surrounding the major European currencies helped the USD find demand and caused the pair to erase a portion of its gains. After dropping to 0.6417, the pair recovered modestly and was last seen trading at 0.6445, where it was still up 0.3% on a daily basis.
In its policy statement, the RBA noted that the Australian economy is going through a very difficult period and added that there is considerable uncertainty about the outlook. Commenting on the pair's outlook after the RBA's remarks, “we see the A$ as being expensive to fair value, that it remains a sell on strength to 0.6550, and it should be closer to 0.62," argued Westpac analysts.
USD stays strong on Tuesday
On the other hand, following Monday's decisive rebound, the US Dollar Index pushed higher on Tuesday boosted by the sharp fall witnessed in the EUR/USD pair and made it difficult for the pair to preserve its bullish momentum. At the moment, the index is up 0.35% on the day at 99.85.
During the American trading hours, Trade Balance and the ISM's Non-Manufacturing PMI report from the US will be watched closely by the market participants. The only data featured in the Australian economic docket on Wednesday will be the Retail Sales for March.
Technical levels to watch for