AUD/USD steadies below 0.7400, looks to post large daily losses

• AUD/USD on track to close second straight day in the negative territory.
• US Dollar Index is edging higher on rising T-bond yields.
• RBA left its policy rate unchanged as expected.

The AUD/USD pair edged higher with the initial reaction to the Reserve Bank of Australia's (RBA) policy announcements during the Asian session but reversed its direction and fell steadily in the remainder of the day. As of writing, the pair, which touched a daily low of 0.7375, was down 0.6% at 0.7395.

RBA's cautious outlook hurts AUD

As expected, the RBA left its policy rate unchanged following the September policy meeting. In its policy statement, the bank noted that the Delta outbreak is expected to delay, but not detail, the economic recovery.

Although the RBA went ahead and reduced the rate of weekly government security purchases to AUD4 billion, it also noted that it will continue to do so until at least mid-February of 2022. In its previous meeting, the bank had said that it would reassess the asset tapering plan in November. This decision seems to have caused the AUD to weaken against its rivals.

Commenting on the AUD/USD's reaction, "the price action overnight is disappointing for those looking for the AUD to strengthen further in the near-term," said MUFG Bank analysts. "We were expecting a more positive reaction in response to a decision from the RBA to stick to their QE taper plans given ourselves and the consensus view was for a delayed taper."

AUD/USD to struggle to surpass the 0.75 resistance – MUFG.

On the other hand, the decisive rally witnessed in the benchmark 10-year US Treasury bond yield provided a boost to the greenback in the absence of macroeconomic data releases and forced AUD/USD to continue to push lower. Currently, the US Dollar Index is up 0.28% on the day at 92.46.

Technical levels to watch for