AUD/USD retreats to 0.7380 area after rising above 0.7400 earlier

• RBA left its policy rate and tapering plan unchanged in July.
• US Dollar Index struggles to hold above 92.00 on Tuesday.
• Major equity indexes in the US look to open modestly higher.

The AUD/USD pair gained traction during the Asian trading hours and climbed to a daily high of 0.7408 before going into a consolidation phase. As of writing, the pair was up 0.33% on the day at 0.7383.

RBA's policy outlook lifts AUD on Tuesday

Following its July policy meeting, the Reserve Bank of Australia (RBA) left its policy rate unchanged at 0.1% as expected. Regarding its bond-buying programme, the RBA reiterated it will reduce purchases in September despite the uncertainty caused by rising coronavirus cases and provided a boost to the AUD.

Assessing the RBA's policy statement, "the RBA appears to be looking through the current delta breakout in NSW noting that ‘the experience to date has been that once virus outbreaks are contained, the economy bounces back quickly’ and that ‘some increase in the unemployment rate is expected in the near term due to the current lockdowns, but most of the adjustment in the labour market is likely to take place through a reduction in hours worked and in participation’," said Westpac analysts.

On the other hand, the US Dollar Index (DXY), which closed flat above 92.00 on Monday, is edging lower on Tuesday and helping AUD/USD stay in the positive territory. Ahead of June Factory Orders and IBD/TIPP Economic Optimism Index data, the DXY is down 0.12% on the day at 91.96.

In the meantime, Wall Street's main indexes remain on track to open modestly higher on Tuesday. In case risk flows continue to dominate the financial markets, the DXY could find it hard to stage a rebound.

Technical levels to watch for