• AUD/USD falls sharply after closing in the positive territory on Monday.
  • RBA left its policy settings unchanged as expected.
  • US Dollar Index climbs higher toward 91.50 on Tuesday.

The broad-based selling pressure surrounding the greenback and the risk-positive market environment helped the AUD/USD pair close in the positive territory on Monday. However, the pair lost its traction on Tuesday as the USD regained its strength. As of writing, AUD/USD was down 0.65% on a daily basis at 0.7710.

AUD ignores RBA’s policy announcements

The Reserve Bank of Australia (RBA) announced on Tuesday that it left its policy rate unchanged at a record low of 0.1% in May and maintained the parameters of the government bond purchase program. Although the RBA revised its 2021 growth expectation higher to 4.75% and 3.5% in 2021 and 2022, respectively, it failed to help the AUD find demand.

On the other hand, the US Dollar Index, which lost 0.35% on Monday, gained traction and touched its highest level since April 22 at 91.39. 

Later in the session, the ISM-NY Business Conditions Index and the IBD/TIPP Economic Optimism Index will be featured in the US economic docket. Meanwhile, the S&P 500 Futures are down 0.1% on the day, suggesting that the greenback could preserve its strength with investors staying cautious in the second half of the day.

On Wednesday, the Commonwealth Bank Services PMI and Building Permits data from Australia will be looked upon for fresh impetus.

Technical levels to watch for

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