AUD/USD trades around 0.6780 as focus shifts to RBA minutes

• China's trade surplus widened to $39.65 billion in September.
• US Dollar Index remains on track to snap a two-day losing streak.
• The Reserve Bank of Australia (RBA) will release the minutes of the October meeting.

The AUD/USD pair gained traction in the second half of the previous week boosted by the optimism surrounding the United States (US)-China trade talks and closed the week in the positive territory. However, with the so-called "phase one" trade agreement failing to ease fears over potential further escalation of the trade dispute, the pair started the new week under pressure and erased a portion of last week's gains. As of writing, the pair was trading at 0.6776, erasing 0.16% on a daily basis.

Meanwhile, the data published from China revealed that the country's trade balance widened to $39.65 billion in September. However, the fact that exports contracted by 3.2% annually and imports fell by 8.5% in the same period suggested that the widening surplus was due to a bigger decline in imports than exports and failed to help the antipodeans find demand.

In the second half of the day on Monday, the pair seems to have gone into a consolidation phase with the market action turning subdued amid the Columbus Day holiday in the US.

Attention turns to RBA minutes

In the early trading hours of the Asian session on Tuesday, the Reserve Bank of Australia will be releasing the minutes of the monetary policy meeting that took place on October 1st. Participants will be looking for fresh clues regarding one more rate cut before the end of the year.

In a report published last week, “Given the headwinds connected with the global economic slowdown and given our view that tensions between the US and the China will persist for some time, we do expect further policy stimulus from the RBA this cycle," said Jane Foley, senior FX strategist at Rabobank. "That said, we also expect the pressure on the Australian government to relax fiscal policy to heighten. We look for further downside potential in AUD/USD towards 0.65 on a 9 to 12 mth view.”

Technical levels to watch for