AUD/USD trades calmly around mid-0.76s ahead of RBA

The AUD/USD pair has been moving in a very tight range near the mid-0.76s in the last couple of hours amid thinning trading volume. As of writing, the pair is trading at 0.7652, losing 0.5% on the day.

The pair's price action on Monday has been dominated by the greenback. The US Dollar Index, rebounding from last week's losses, is up 0.6% at 95.98 at the moment. Although the upsurge started out as a technical correction in the early day, today's data from the U.S. gave an additional lift to the index. Commenting on today's solid ISM PMI Manufacturing Index, ING analysts argued that the manufacturing sector is clearly a source of strength in the US right now and further added that given the tight labour market and a decent pick-up in domestic demand, Fed is likely to make another rate hike in September.

• US: Manufacturers reported a disappointing end to the second quarter - Markit
• US: Economic activity in the manufacturing sector expanded in June - ISM

Now with the American traders already in the mood for the Independence Day holiday, investors turn their attention to the Asian session, in which the Reserve Bank of Australia is scheduled to announce its monetary policy decision and release its statement. Given the recent trend of injecting hawkish expectations into the markets by major central banks, the market is speculating an optimistic message about the economy from the RBA. However, Daniel Been,  Head of FX Research at ANZ, thinks that the RBA is comfortably on hold and will not want to send a signal to the contrary.

• RBA and Riksbank: Hawkish surprise coming? - Rabobank

Technical outlook

Despite today's correction, the pair is still dangerously close to the 3-month top level set at 0.7710 on June 30. If the RBA brings a hawkish surprise, the pair could pierce through that level and aim for 0.7750 (Mar. 21 high) and 0.7800 (psychological level). On the downside, supports could be seen at 0.7600/0.7595 (psychological level/20-DMA), 0.7535 (100-DMA) and 0.7500 (psychological level).