AUD/USD weak near 0.7900 on risk aversion, ahead of RBA

• Dramatic decline in equity prices in Wall Street. 
• USD, JPY up across the board. 
• Key event ahead: RBA decision.

The AUD/USD pair was moving toward Monday’s lows near the end of the US session. The recovery from 0.7889, the lowest since January 12, found resistance at 0.7950 and the pair pulled back toward 0.7900. 

The latest decline took on the back of a stronger US Dollar amid risk aversion as Wall Street suffers another sell-off. The Dow Jones was losing more than 1,000 points, on a dramatic slide that adds to last week losses. If the decline in Wall Street continues it would increase investor’s worries and should strengthen the demand for the US dollar and the yen. 

On Tuesday, at 03:30 GMT, the Reserve Bank of Australia will announce its decision on momentary policy. No change in the key rate is expected (1.5%). The tone of the statement will be watched closely. Analysts expect not much changes from the RBA taking into account the latest (relatively low) inflation numbers. A “hawkish” RBA would be a surprise and should boost the Aussie. 

AUD/USD Technical outlook 

The pair is at risk of extending its slide, particularly on a break below 0.7890, which stands for the 38.2% retracement of its latest bullish run, according to Valeria Bednarik, Chief Analyst at FXStreet. 

“In the 4 hours chart, technical readings favor a bearish breakout, as the pair continues developing well below a bearish 20 SMA, while technical indicators resumed their declines within negative territory after correcting oversold readings”, she added.