AUD/USD Outlook: Aussie Dollar Stands At The Back Foot Ahead Of RBA Policy Meeting

The Australian dollar dipped on Monday, dragged lower by the weaker Chinese yuan but remains within congestion, extending into the sixth straight day. Traders await RBA’s policy meeting (due early on Tuesday) for new signals, as the central bank is widely expected to raise interest rates by 25 basis points to 3.60% (the highest since Jan 2012).

A more critical signal for Aussie is an expectation that the RBA will hike again in the second quarter and push the interest rate higher than initially estimated. The central bank’s action should offer new support to the currency.

However, the US Federal Reserve is also seen remaining on an extended policy tightening path, with more aggressive action not ruled out that would offer stronger support to the greenback and limit the gains of its Australian counterpart.

Bearish daily studies (rising negative momentum / MA’s back to full bearish setup) keep Aussie under pressure for a renewed attack at the recent range floor (0.6694) and extension towards 0.6663/29 (50% retracement of 0.6170/0.7157 ascend / Dec 20 low).

Converging 100/10DMA’s (0.6752/62 respectively) are about to form a bear-cross and mark initial resistance, guarding more significant range top / broken Fibo 38.2%  (0.6783) and 200DMA (0.6788). A firm break of these barriers is needed to sideline downside risk and open the way for a stronger recovery.

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