Aussie Holds Above 0.7000 as Traders Await RBA Rate Decision

Key Moments

Consolidation in AUD/USD Ahead of RBA

The AUD/USD pair is extending its recent sideways pattern during the Asian session on Tuesday, trading slightly above the key 0.7000 psychological level. The pair is fluctuating near its lowest reading since August 4 as market participants wait for the upcoming Reserve Bank of Australia (RBA) interest rate decision.

The Australian central bank is broadly expected to increase the Official Cash Rate (OCR) by 25 basis points after leaving policy unchanged at its previous two meetings. The main focus for traders, however, is on the accompanying Monetary Policy Statement (MPS) and on remarks from RBA Governor Michele Bullock at the post-meeting press conference. Investors are watching closely for any signals on the future path of policy that could influence the Australian Dollar and set the next directional move in AUD/USD.

US Dollar Strength Caps Aussie Upside

Even if the RBA delivers a hawkish message, the scope for a sustained AUD/USD rebound appears constrained by the currently supportive backdrop for the US Dollar. Market participants have been assigning a higher probability to another US Federal Reserve interest rate increase in October as energy-related inflation concerns persist. These expectations have driven US bond yields to multi-year highs, bolstering the appeal of the Greenback.

In addition, geopolitical uncertainties are helping to keep the US Dollar close to a two-month peak. This firm USD tone is likely to limit any upside reaction in the AUD/USD pair, even in the event of a policy surprise from the RBA.

Trade Truce Supports AUD, But Bears Eye 0.7000 Break

On the supportive side for the Australian currency, the United States and China have extended their tariff truce by two months following a summit between President Donald Trump and Chinese President Xi Jinping. This development may offer some underlying backing to the Aussie, given its sensitivity to Chinese-related news.

Given the current backdrop, many traders may prefer to wait for a clear and sustained move below the 0.7000 handle before initiating new bearish positions in AUD/USD. A decisive break lower could signal continuation of the three-week-old corrective pullback from the highest level since May 14, which was reached earlier this month.

Technical Picture: Key Levels in Focus

From a technical standpoint, AUD/USD is trading just under the 200-day Simple Moving Average (SMA) at 0.7027, a configuration that points to a mildly negative near-term bias. At the same time, spot remains above the 61.8% Fibonacci retracement support at 0.7006, which may continue to act as an initial floor.

Below the 61.8% retracement at 0.7006, the next notable support is seen at the 78.6% retracement level at 0.6943, where buyers may attempt to slow or halt the decline if selling pressure reemerges. On the upside, immediate resistance is aligned at the 200-day SMA at 0.7027, followed by the 50.0% Fibonacci retracement at 0.7050. If AUD/USD extends a corrective recovery, more substantial supply could appear near the 38.2% level at 0.7095 and the 23.6% retracement at 0.7149.