AUD/USD consolidates gains to 0.6820 ahead of RBA’s rate decision

• AUD/USD fails to extend run-up beyond the nine-day high.
• The US takes tough stands against Argentina and Brazil, keeps pressure on the EU while also standing ready for tariffs on China.
• RBA is likely to hold the monetary policy intact, signals for rate cuts in 2020 will be in focus.

AUD/USD steps back from multi-day high to 0.6820 during early Tuesday morning in Asia. The Aussie pair previously benefited from the US dollar (USD) weakness and upbeat data from China but is recently under pressure amid rising risk aversion and profit-booking ahead of the key event.

Despite witnessing mixed readings at home, Aussie traders initially cheered welcome Purchasing Managers’ Index (PMI) numbers from Australia while also benefiting from the downbeat US dollar (USD) performance. The greenback had to bear the burden of ISM Manufacturing PMI as well as the renewal of doubts over the phase-one deal between the United States (US) and China.

Not only the US-China story but the recent show of trade protectionism by the US seems to negatively affect the market sentiment. The US reinstated steel tariffs on Argentina and Brazil whereas it stood ready to announce further tariffs on the European Union after gaining support from the World Trade Organization’s (WTO) verdict on Airbus. Further, the US Trade Secretary Wilbur Ross signaled that the scheduled tariffs on Chinese products, for December 15, will go into effect if the deal isn’t reached between now and then. On the other hand, Chinese have shut Hong Kong’s gate for the US military and announced sanctions on the US non-government organizations.

Against the odds were comments from the White House advisor, Kellyanne Conway, mentioning that China trade-deal is being written-up. Elsewhere, US President Donald Trump keeps his criticism of the Federal Reserve’s easy money policy.

While portraying the moves, the US 10-year Treasury yields recovered back beyond 1.80% but Wall Street marked heavy losses on the first trading day of December.

Investors will now focus on the monetary policy meeting by the Reserve Bank of Australia (RBA) while a third quarter (Q3) Current Account Balance from Australia, expected 6.3B versus 5.9B prior, can offer intermediate moves. The RBA is widely anticipated to hold its present monetary policies unchanged. However, latest comments from the RBA policymakers and a mixed set of data at home, not to forget US-China trade deal noise, keep pushing traders to look for clues to 2020 rate cuts.

Technical Analysis

As far as prices stay above 100-day Simple Moving Average (SMA) level of 0.6815, expectations of witnessing early-November lows close to 0.6860 back to the chart stay on the cards. Alternatively, 50-day SMA level surrounding 0.6800 and November month low near 0.6755 may become sellers’ choices.