AUD/USD holds above 0.7100 as USD remains on the back foot

• AUD/USD remains on track to close second straight day higher.
• US Dollar Index stays below 94.00 ahead of presidential debate.
• Building Permits data will be featured in the Australian economic docket on Wednesday.

The AUD/USD pair climbed to a weekly high of 0.7139 on Tuesday but lost its traction during the American session. After retreating to 0.7100 area, however, the broad-based USD weakness allowed the pair to regain its traction. As of writing, AUD/USD was up 0.8% on the day at 0.7126.

Focus shifts to US presidential debate

Although Wall Street’s main indexes are trading in the negative territory, the USD struggles to find demand as a safe-haven as investors remain reluctant to make large bets ahead of the first presidential debate. At the moment, the US Dollar Index is losing 0.38% at 93.90.

Previewing this event and its potential impact on the USD, “if Trump wins the televised encounter and improves his chances of re-election, there is a greater probability that Senate Majority Leader Mitch McConnell and his colleagues would devote more time to boosting the economy and their chances of holding onto the upper chamber,” said FXStreet analyst Yohay Elam. “In this case, the greenback could fall while stocks and gold would shine.”

On the other hand, the Australian Bureau of Statistics will release Private Sector Credit and Building Permits data on Wednesday. Market participants are likely to ignore this data and the USD’s market valuation is expected to remain as the primary driver of AUD/USD’s movements in the near-term.

Technical levels to watch for