AUD/USD stuck in tight range around mid-0.79s

The AUD/USD pair is trading in a 25-pip range on Monday amid a lack of market moving catalysts. As of writing, the pair is trading at 0.7951, down 17 pips, or 0.22%, on the day.

Although the greenback is modestly lower below the 93 handle, the pair is struggling to take advantage of that situation. As of writing, the DXY was at 92.55, losing 0.3% on the day. Over the weekend, North Korea announced that it tested a hydrogen bomb, forcing the market sentiment to stay negative on the first trading day of the week and weighing on the global major equity indexes and risk-sensitive currencies like the AUD. The Nikkei 225 Index closed the day nearly 1% lower while the UK FTSE 100 Index is down 0.3% and the German Dax Index is dropping 0.1%.

In the remainder of the session, the pair is unlikely to show any sharp fluctuations as the US market will be closed due to the Labor Day holiday. Later in the Asian session, the RBA is going to announce its monetary policy decision. Markets expect the cash rate to remain unchanged. “Although the economy is gathering momentum, it is still premature to tighten soon. The strong Aussie could delay the economic transition away from the mining sector, by reducing tourism,” argued Kohei Iwahara, Research Analyst at Natixis, in a recent report.

• RBA policy enters testing period - BAML

Technical outlook

Both on the daily and H4 charts, the RSI indicator is moving sideways near the 50 handle, failing to provide any clues regarding the next short-term direction. 0.7920 (20-DMA) could be seen as the first technical support before 0.7870 (Aug. 31 low) and 0.7810 (Aug. 15 low). On the upside, resistances align at 0.8000 (psychological level), 0.8040 (Aug. 1 high) and 0.8100 (psychological level).