Ella 
AUD/USD continues to trade sideways as investors turn cautious ahead of a U.S. Federal Reserve (Fed) policy decision. During the Asian session on Tuesday, the spot price of AUD/USD was trading around 0.6430.
The Reserve Bank of Australia (RBA) released the minutes of its September monetary policy meeting. The Reserve Bank of Australia did consider a 25 basis point hike, but ultimately decided to keep rates on hold. The decision was made because recent economic data has not significantly changed the economic outlook.
The minutes of the meeting also showed that the central bank was prepared to further tighten monetary policy if inflation is more persistent than expected. However, with no fresh hawkish signals in the minutes, this could become a headwind for AUD/USD.
On the other hand, the US Federal Reserve (Fed) is expected to keep interest rates unchanged at its September policy meeting, which is weighing on AUD/USD. However, investor caution ahead of a policy decision could provide support for the dollar. This caution may stem from the possibility of a 25 basis point rate hike by the end of 2023.
Traders appear to be factoring in the possibility that the Fed may keep interest rates higher for an extended period due to the resilience of incoming macro data and persistently higher inflation. Market participants will scrutinize the central bank’s statement for any hints or insights into the potential future path of interest rates.
The U.S. dollar index (DXY) snapped a two-day losing streak and was trading higher near 105.20, below the six-month high hit last week. However, U.S. Treasury yields rebounded from the previous day’s losses. At press time, the U.S. 10-year Treasury yield was 4.31%. Higher yields could provide support for the dollar.
Investors are likely to focus on upcoming U.S. macro data, including August building permits and housing starts later in the North American session. These data sets could provide a potential boost to U.S. economic activity, which could help traders place new bets on the AUD/USD currency pair.
