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Australian Dollar Extends Rally After RBA Raises Economic Growth Forecast

The Australian dollar continued to be higher against its major counterparts in the European session on Tuesday, after the Reserve Bank of Australia kept its interest rate on hold and slightly upped its growth forecast for this year and next.

The board of the Reserve Bank of Australia, governed by Philip Lowe, voted to maintain the cash rate at 1.50 percent. The interest rate has been at the current level since August 2016.

"Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the bank said in a statement.

The bank raised its forecast for economic growth in 2018 and 2019, which is expected to average around 3.5 percent. Earlier, the bank expected GDP growth to average 3.25 percent for both this year and next.

Meanwhile, caution prevailed ahead of key economic and political events scheduled for the week, which includes the midterm elections in the U.S., and the Federal Reserve's monetary policy review.

In the US midterm elections, it is expected that the democrats will regain control of the House while Republicans hold on to a slender majority in the Senate. Reuters is of the view that global stocks may rally on hope of more tax cuts if Republicans retain their House majority.

The currency has been trading in a positive territory against its major counterparts in the Asian session.

The aussie strengthened to a 4-day high of 0.7240 against the greenback, from a low of 0.7205 hit at 10:15 pm ET. The aussie is poised to find resistance around the 0.74 level.

The aussie firmed to 81.97 against the yen, its highest since October 2. The aussie is seen finding resistance around the 83.00 region.

Data from the Ministry of Internal Affairs and Communications showed that Japan household spending fell 1.6 percent on year in September, coming in at 271,273 yen.

That was well shy of expectations for an increase of 1.5 percent and down sharply from the 2.8 percent gain in August.

After falling to 1.5832 against the euro at 10:15 pm ET, the aussie reversed its course and touched a 4-day high of 1.5755. On the upside, 1.55 is possibly seen as the next resistance level for the aussie.

Survey data from IHS Markit showed that Eurozone's private sector expanded at the weakest pace in over two years in October as both manufacturing and services recorded slower rates of growth.

The composite Purchasing Managers' Index, or PMI, fell to 53.1 from September's 54.1. The reading was the lowest since September 2016. The flash reading for the composite PMI was 52.7.

The aussie appreciated to 0.9497 against the loonie, a level not seen since September 6. Next key resistance for the aussie is likely seen around the 0.96 area.

The aussie held steady against the kiwi, after having advanced to a 4-day high of 1.0851 at 11:30 pm ET. The pair was valued at 1.0813 when it closed deals on Monday.

Looking ahead, at 8:30 am ET, Canada building permits for September will be out.

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