- AUD/USD turned south after climbing to fresh multi-year highs.
- US Dollar Index staged a decisive rebound during American session.
- Investors await RBA Meeting Minutes, key data from China.
The AUD/USD advanced to its highest level since June 2018 at 0.7578 on Monday but struggled to preserve its bullish momentum in the second half of the day. With the greenback gathering strength against its rivals during the American trading hours, the pair turned flat on the day in the 0.7530 area.
DXY reverses course in American session
Earlier in the day, the broad-based selling pressure surrounding the USD and the risk-on market environment fueled AUD/USD’s rally. Supported by coronavirus vaccine optimism and renewed Brexit deal hopes, major European stocks registered strong gains and Wall Street’s main indexes opened decisively higher.
Despite a lack of significant fundamental drivers and macroeconomic data releases, the US Dollar Index (DXY), which slumped to its lowest level since April 2018 at 90.42, staged a rebound and now looks to finish the day unchanged around 90.70. A pullback witnessed in the US stocks seems to be helping the USD find some demand.
On Tuesday, Retail Sales and Industrial Production data from China will be watched closely by market participants. More importantly, the Reserve Bank of Australia will publish its December Meeting Minutes.
The RBA left its monetary policy settings unchanged as expected in December and Governor Philip Lowe noted that they have an open mind about adjusting the quantitative easing program. If the publication reaffirms the RBA’s commitment to additional easing measures, the AUD could have a hard time outperforming its rivals.
Technical levels to watch for
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