AUD/USD: RBA is the main event, 0.6710 and 0.66 are key levels

• AUD/USD on thin ice into the RBA even tonight.
• AUD/USD bulls looking for buy-in through 0.6710 stops while bears look to 0.66 the figure.

In a nervous start to the week with China returning and on Reserve Bank of Australia day, AUD/USD is currently trading at 0.6688 having travelled between a range of 0.6682 and 0.6707 on the day so far. We have seen some interest from the bulls at the lowest levels since March 2009 and it really is make or break time. There is buying stop interest through 0.67 the figure with liquidity towards 0.68 handle prior support structures, but it really all depends on the rhetoric of the RBA and the decision – it really could go either way for the Aussie tonight.

RBA outlook

The RBA will have to consider not only the economic data, which by the margin has been a little better of late, but the combination of the bushfire emergency, as well as the concerns related to the coronavirus, could convince the RBA to lower the Cash Rate (by 25bp) tonight. A more dovish tone, in the very least,  suggesting an imminent rate cut could still weigh on the Aussie with targets to below 0.66 the figure. More on that here: RBA Preview: Imminent cut expectations to weigh heavily on AUD

In the meantime, analysts at TD Securities have compiled their outlook for the various possible outcomes, as follows: 

• Cuts (<10%): AUD may find support around US$0.66.
• On hold but more dovish (<30%): What could be dovish is the removal of 'gentle turning point' if it is accompanied with another dovish commentary.
• On hold - retains easing bias (60%)On hold but more dovish (<30%): We expect the RBA to flag it is in 'wait and see' mode.
• On hold but more hawkish (<1%): Initial target US$0.6725. Potential to trade above US$0.6740, s/t resistance toward US$0.6775.

US dollar making a valiant comeback

Meanwhile, after a significant drop on Friday, the US dollar has been better bid gain, despite US 10-year yields still within bearish territories and a market focus on the curve with dwindling prospects of the reflation trade taking hold this year. DXY has been as high as 97.89 from a low of 97.37 and the 10-year is at 1.5360% but had spiked earlier in the session to a high of 1.5760%.

Coronavirus news

Forex Today: China's 'band-aid' efforts offset coronavirus led stocks crash; PMIs in focus

It was a bit of a blood bath overnight with China returning. Yohay Elam, Senior Editor and Analyst at FXstreet update us on the Coronavirus news as follows:

Coronavirus news: The number of official cases has topped 17,000, and the death toll is around 360. The first death outside China has been reported, and additional airlines have limited flights to the mainland. Testing kits have improved, and medicine used for HIV may help in curing the virus. The worst is probably still ahead. 
Coronavirus market response: Chinese markets have reopened after the New Year's holiday with a sharp downfall, carrying down prices of metals. The People's Bank of China cut interest rates on reverse repos and took other measures to stabilize markets.  
 

AUD/USD levels

• Chart Of The Week: AUD/USD sold to critical support ahead of RBA