- US Dollar Index breaks through 94.50 ahead of PMI data.
- Risk-off mood weighs on risk-sensitive currencies on Monday.
The greenback strength on Monday continues to weigh on USD-denominated pairs. The AUD/USD pair, which recorded losses for the fourth straight time last week, failed to stay above the 0.74 mark today and touched its daily low at 0.7352 in the last hour. As of writing, the pair was trading at 0.7357, down 50 pips, or 0.65%, on the day.
The pair’s price action is being driven by the USD valuation. After dropping sharply on Friday, the US Dollar Index gained traction on Monday as investors started pricing the continuation of the hawkish monetary policy strategy by the Federal Reserve Bank.
Before the ISM and Markit release their manufacturing PMI figures later in the session, the DXY advanced to a session high of 94.66 and was last seen at 94.60, where it was up 0.4% on the day. Upbeat PMI readings could provide an additional boost to the buck.
On the other hand, European equity indices are recording losses on Monday, pointing to a weak appetite for risk, which makes it difficult for the aussie to find demand.
Technical outlook
With today’s drop, the RSI indicator on the daily chart turned south before reaching the 50 mark, suggesting that sellers, once again, are starting to dominate the price action. The pair could encounter the first technical resistance at 0.7440 (20-DMA) ahead of 0.7500 (psychological level/50-DMA) and 0.7575 (Jun. 14 high). On the downside, supports are located at 0.7320 (Jun. 27 low), 0.7285 (Jan. 6, 2017, low) and 0.7200 (psychological level/Dec. 22, 2016, low).
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