AUD/USD erases recovery gains, returns to 0.7200 area

• AUD/USD is struggling to stage a meaningful recovery on Tuesday.
• US Dollar Index is edging higher following an early drop on Tuesday.
• FOMC Chairman Powell will testify before House Financial Services Committee.

The AUD/USD pair dropped to its lowest level in nearly a month at 0.7179 on Monday but staged a modest rebound during the European trading hours. After rising to 0.7235, however, the pair lost its traction in the early American session and was last seen losing 0.11% on a daily basis at 0.7215.

AUD weakens on dovish RBA commentary

Earlier in the day, Reserve Bank of Australia’s Deputy Governor, Guy Debelle, noted that a lower exchange rate for the AUD would be beneficial for the Australian economy said foreign exchange intervention was a policy option. Pressured by these dovish remarks, the AUD started the day under pressure on Tuesday.

On the other hand, the US Dollar Index (DXY) stayed in a consolidation phase during the first half of the day and allowed AUD/USD to recover a portion of its losses.

Nevertheless, the cautious market mood helped the greenback gather strength and forced the pair, once again, to turn south. At the moment, the DXY is posting modest daily gains at 93.60. The first data from the US showed that the Phiily Fed Nonmanufacturing Index improved to 8 in September from 1.6 in August but had little to no impact on the USD’s performance against its rivals. 

Later in the session, FOMC Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will be testifying before the House Financial Services Committee. Furthermore, Existing Home Sales and Richmond Fed Manufacturing Index data will be looked upon for fresh impetus. 

Technical levels to watch for