• AUD/USD falls for the third day in a row amid sustained USD buying.
  • High US bond yields and a risk averse mood offer support for the safe-haven greenback.
  • The decline appears to be cushioned as traders now look to the RBA’s policy meeting on Tuesday.

AUD/USD is attracting fresh sellers after an early rally in the 0.6425-0.6430 region and falling for the third day in a row on Monday. The pair remains defensive through the start of the North American session and is currently near a four-day low around the 0.6375-0.6370 region.

A combination of supportive factors is helping the US Dollar capitalize on last week’s late rebound from a one-month low, which, in turn, should put downward pressure on the AUD/USD pair. Markets fully priced in another oversized 75 basis point rate hike at the end of a two-day FOMC monetary policy meeting on Wednesday. Expectations remain supportive of high US Treasury bond yields, which, along with a softer risk tone, supports the safe-haven greenback.

The disappointing Chinese manufacturing PMI release further fuels concerns about a deeper global economic slowdown and weighs on risk sentiment. Additionally, investors remain concerned about potential economic headwinds from the resurgence of COVID-19 cases in China. This is proving to be another factor weighing on the growth-sensitive Australian dollar, although the decline remains cushioned ahead of major central bank event risks this week.

The Reserve Bank of Australia is expected to announce its policy decision during Tuesday’s Asian session. Last week’s stronger domestic consumer inflation figures all but confirmed another 50 basis point rate hike by the RBA and therefore the focus will be on the policy statement which l ‘accompanied. The focus, however, will remain on the outcome of Wednesday’s highly anticipated FOMC meeting. This will play a key role in determining the next leg of a directional move for the AUD/USD pair.

Technical levels to watch