AUD/USD stays below 0.7100 ahead of RBA announcements

• US Dollar Index extends rally on Monday.
• US-China trade headlines keep AUD's losses vs USD limited. 
• RBA is expected to keep the policy rate unchanged at 1.5%.

After opening the week with a small bullish gap and rising above 0.71 on the back of headlines suggesting that President Trump his Chinese counterpart Xi could sign a trade agreement when they meet in later March, the AUD/USD pair failed to push higher and erased its daily gains. As of writing, the pair was virtually unchanged on the day at 0.7080.

The fresh USD-buying wave that hit the FX markets in the early NA session caused the pair to extend its slide. Although the data published by the U.S. Census Bureau today revealed that construction spending in December declined by 0.6% in December and the ISM-NY Business Conditions Index fell to 61.1 in February from 63.4 in January, the US Dollar Index rose to its highest level in two weeks at 96.80. At the moment, the DXY is up 0.36% on the day at 96.78.

In the Asian session on Tuesday, the RBA's policy statement will be the next significant catalyst for the pair. Previewing the event, “The RBA can take comfort that businesses are holding up better than NAB's Dec Survey suggested (Q4 capex/Jan employment were strong), helping to provide a cushion against the soft consumer,” TD Securities analysts noted.

Technical levels to consider