Having recently bumped up the efforts to combat the coronavirus (COVID-19), the Reserve Bank of Australia (RBA) is up for conveying its latest monetary policy decision on 04:30 GMT on Tuesday.

While the Aussie central bank has already shown the intention to keep the interest rates near the record low of 0.25%, traders might look for any change in the Quantitative Easing (QE) for fresh impulse. However, the latest upbeat rhetoric from Governor Philip Lowe rules out calls of any action during the meet. Even so, AUD/USD traders remain cautious as the quote seesaws near four-month high ahead of the event.

Analysts at Westpac anticipate the RBA policymakers to speak for the Aussie dollar’s recent strength:

With the RBA continuing to rule out negative rates, the cash rate is set to remain at its current level until at least 2023, but we assess that the bond target will be lifted during 2022. Governor Lowe said last week that the economy appeared to be tracking either in line with May’s quarterly forecasts, or a little better. The RBA Board might also express some concern over the steep rise in A$.

TD Securities, on the other hand, expect no major surprises from the event:

The RBA Board Meeting is unlikely to throw any major surprises. We expect the Bank is likely to strike an upbeat note, pointing to health outcomes that are not as bad as initially feared with the potential for the labor market to hold up better than anticipated. At the same time, we expect the Bank to reinforce its commitment to employment and inflation objectives, implying rates on hold are likely for the next few years. The Bank is likely to pledge further support in keeping funding costs low and step up bond purchases if required. Otherwise, the RBA is watching the data like the rest of us.

How could the RBA decision affect AUD/USD?

Considering the AUD/USD pair’s latest run-up to multi-week high, traders are looking for any downbeat remarks to book the profits and wait for lower prices for fresh positions. However, RBA’s Lowe might keep praising the government’s efforts and the economic scenario to favor the bulls, which in turn can restrict fresh downside.

As a result, traders should wait for a clear view of the Australian dollar’s recent performance by the RBA policymakers as fears over the spike can trigger a fresh downside. However, an absence of any such clues, coupled with optimism in the rate statement, could keep the AUD/USD prices strong above 0.6800. It’s worth mentioning that any surprise announcements, either in the form of QE or the most unlikely interest rate change, could have severe reactions.

Technically, Overbought RSI seems to question the bulls beyond the recent high near 0.6815. Though, selling pressure will remain limited unless the quote slips below a 12-day-old support line around 0.6620.

Key quotes

RBA Preview: Not enough to kick-start anything in AUD/USD at make-or-break levels

AUD/USD: Further upside stalls around 0.6800 ahead of RBA

AUD/USD Forecast: Flirting with 0.6800 ahead of RBA’s announcement

About the RBA interest rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.