• AUD/USD extended its rally after breaking above 0.7400.
• The risk-positive market environment is helping the AUD find demand.
• RBA's Lowe says they won't respond until they see pervasive price pressures.

After closing the first day of the week virtually unchanged, the AUD/USD pair edged slightly lower during the Asian trading hours but didn't have a difficult time regaining its direction. The pair was last seen trading at its highest level in two weeks at 0.7430, rising 0.45% on a daily basis.

Cautious comments from Reserve Bank of Australia (RBA) Governor Phillip Lowe and the risk-averse market atmosphere forced AUD/USD to stay on the back foot. Lowe reiterated that they will not respond with a policy until there is evidence of pervasive price pressures and added they are monitoring how persistent supply-side problems will be.

Nonetheless, the positive shift in risk sentiment in the European trading hours helped AUD/USD push higher and buyers continued to show interest once the pair climbed above 0.7400.

Reflecting the upbeat market mood, US stock index futures are posting modest gains and the US Dollar Index is flat near 94.50. There won't be any high-tier data releases on Tuesday and the risk perception is likely to continue to impact the pair's action.

AUD/USD technical outlook

Assessing AUD/USD's near-term outlook, “the 50% Fibonacci retracement of the 0.8007-0.6968 range, at 0.7487, is now within reach," said Benjamin Wong, Strategist at DBS Bank. "Hence selling into strength (on a protracted weakening of its terms of trade and industrial metals index) as we approach the daily Ichimoku chart cloud resistance levels at 0.7499 and 0.7557 needs to be risk managed.”

Additional levels to watch for