AUD/USD regains 0.7450 on USD pullback, RBA in focus

• AUD/USD refreshes intraday high, mildly bid around seven-week top.
• DXY falls on upbeat market sentiment, S&P 500 Futures, US Treasury yields print mild gains.
• Virus fears ease but challenges to RBA tapering remain elevated.
• China trade balance, US traders’ return will offer additional filters to the upside moves.

AUD/USD takes the bids to refresh intraday high to 0.7455, up 0.15% on a day, during early Tuesday. In doing so, the Aussie pair reverses the previous day’s pullback from the highest levels since mid-July as the US Dollar Index (DXY) mark losses.

That said, the DXY drops 0.08% intraday to 92.13 by the press time, refreshing daily low, as market sentiment improves, also underpinning the demand for riskier assets like commodities and Antipodeans including the AUD/USD prices.

The greenback contrasts the US 10-year Treasury yields, up 1.7 basis points (bps) to 1.339% as well as the mildly bid S&P 500 Futures as markets in the US and Canada brace for weekly opening after the Labour Day holiday on Monday. It’s worth noting that the US Treasury yields seem to react to Friday’s downbeat jobs report for August, weighing on the Fed’s tapering plan.

Additionally, no new virus cases in Victoria and hopes of the Reserve Bank of Australia’s (RBA) delay in tapering also favor the AUD/USD buyers of late.

It should be noted, however, that the pre-RBA caution and fears of a spike in the virus-led hospitalizations in Australia challenge the pair buyers. Amid these plays, the Commonwealth Bank of Australia (CBA) said, “The near-term outlook is bleak, as extended lockdowns in NSW and Victoria cripple economic activity.”

Moving on, US dollar moves and risk appetite could entertain AUD/USD traders ahead of the RBA decision. Although markets already brace for a delayed taper of the weekly bond purchase by the RBA, any surprises will be reacted with higher volume.

Read: Reserve Bank of Australia Preview: Focus on tapering and growth

Technical analysis

AUD/USD recovery eyes a confluence of 100-day and 200-day EMA, followed by a downward sloping resistance line from early May around 0.7470–80. Alternatively, an ascending support line from August 23, near 0.7410 challenges pullback moves.