AUD/USD clings to modest gains above 0.7200 handle, focus shifts to RBA

   •  Near-term oversold conditions prompt some short-covering move.
   •  US-China trade tensions continue to cap ahead of Tuesday’s RBA decision.

The AUD/USD pair extended its steady recovery move from 20-month lows and is currently placed at the top end of its daily trading range, just above the 0.7200 handle.

With investors looking past today's unimpressive Aussie retail sales data and Caixin Chinese Manufacturing PMI, the pair managed to recover around 40-50 pips from an intraday low level of 0.7166 amid near-term oversold conditions.

However, the US President Donald Trump's plan to impose 25% tariffs on additional $200 billion worth of Chinese imports, as early as this week, continued weighing on the China-proxy Australian Dollar and kept a lid on any meaningful up-move.

Moreover, relatively thin market liquidity conditions, on the back of the Labor Day holiday in the US, could also be one of the factors holding traders back from placing any aggressive bets ahead of the RBA monetary policy update on Tuesday.

Apart from the RBA announcement, this week's important macro releases, including the Aussie Q2 GDP growth figures and the keenly watched US non-farm payrolls data, will now be looked upon for fresh directional impetus.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet explained, “the bears are likely to push the AUD/USD down to the February 2016 low of 0.6827 in the next few months.”

“However, the 14-week RSI is reporting oversold conditions, as a result, the pair could test supply around the downward sloping (bearish) 5-week MA and 10-week MA, currently located at 0.7265 and 0.7339, respectively, before falling toward 0.6827,” he adds further.