FX

AUD/USD shifts auction above 0.6500 amid weaker DXY, US ISM Services PMI eyed

  • AUD/USD is eyeing the establishment of an auction profile above 0.6500.
  • The RBA trimmed its pace of hiking interest rates to keep the growth prospects intact.
  • A lower-than-expected US ISM Services PMI reading could weaken the DXY further.

The AUD/USD pair is oscillating majorly above the psychological resistance of 0.6500 in the early Tokyo session. The asset is aiming to comfortably establish above 0.6500 as the US dollar index (DXY) has extended its losses after dropping below the cushion of 111.00. The major is displaying signs of volatility contraction after the announcement of the interest rate decision by the Reserve Bank of Australia (RBA).

On Tuesday, RBA Governor Philip Lowe announced a rate hike by 25 basis points (bps). The extent of the rate hike was lower than the expectations of 50 bps as the central bank preferred to take growth prospects along with the foremost agenda of bringing price stability to the economy. This has pushed the Official Cash Rate (OCR) to 2.6%. RBA policymaker ditched the ongoing pattern of accelerating interest rates by 50 bps.

Now, the deviation between current rates at 2.6% and desired rate of 3.85% is extremely low, therefore the RBA has scaled down the pace of hiking interest rates.

Meanwhile, the DXY has slipped to near the psychological support of 110.00. The asset is expected to display a pullback move as short covering will kick-start after a sheer weakness.

In today’s session, the DXY will dance to the tunes of US ISM Services PMI data. The economic data is seen lower at 56 vs. the previous reading of 56.9. Also, the New Orders Index data will trim significantly to 58.9 against the prior release of 61.8.

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