AUD/USD erases daily losses on broad-based greenback sell-off
The AUD/USD pair plummeted to its lowest level in nearly three months at 0.7785 in the early European session before staging a modest recovery above the 0.78 mark. As of writing, the pair was trading at 0.7825, virtually unchanged on the day.
The aussie lost its footing against its peers in the late Asian session on Tuesday after the RBA'a monetary policy statement triggered a broad-based sell-off. Although the RBA decided to keep its policy rate unchanged at 1.5% in line with market expectations, the statement revealed that the bank was concerned about the strengthening currency, which could weigh on the economic growth and inflation.
- RBA leaves rates on-hold, a rising AUD would slow the economy
- RBA keeps rates on hold, asserts that recent developments are in line with outlook - Westpac
Nonetheless, the pair gained traction after the greenback started to give back its earnings against its peers with the US Dollar Index turning negative below the mid-93s. At the moment, the index was moving calmly near the 93.30 handle, losing 0.2% on the day. Despite that recent fall, however, the index might be looking for the next opportunity to push higher in the near-term as today's move looked nothing more than a technical correction of yesterday's sharp upsurge. Furthermore, investors could continue to price the probability of another Fed rate hike in December, which is now at 76.7% according to the CME Group FedWatch Tool.
Technical outlook
Despite that recent recovery, the RSI indicator on the daily graph remains below the 50 mark, suggesting that the near-term bearish outlook is likely to persist. The pair could face the initial support at 0.7785 (daily low) ahead of 0.7690 (200-DMA) and 0.7600 (psychological level). On the upside, resistances align at 0.7840 (100-DMA), 0.7935 (50-DMA/20-DMA) and 0.8000 (psychological level).
- Sell AUD/USD this week - Citi