AUD/USD retreats to 0.7170 area as market mood sours

• AUD/USD reversed its direction after rising above 0.7200.
• US Dollar Index pares early gains to turn flat near 93.80.
• Wall Street’s main indexes edged lower after opening sharply higher.

The AUD/USD pair rose to its highest level in 10 days at 0.7210 on Thursday but struggled to preserve its bullish momentum during the American trading hours. After declining to a session low of 0.7163, the pair rebounded modestly and was last seen gaining 0.23% on the day at 0.7177.

DXY recovers as US stocks lose strength

Earlier in the day, the risk-on market environment caused the greenback to lose interest as a safe-haven and helped AUD/USD push higher. Following a drop to 93.53, however, the US Dollar Index (DXY) gained traction and turned flat on the day near 93.80. 

The renewed USD strength seems to be a product of Wall Street’s main indexes uninspiring performance in the early American session. After gaining more than 1% following the opening bell, the S&P 500 Index erased a portion of its daily gains and was last seen up 0.6% on the day at 3,382.

The data from the US showed that the business activity in the manufacturing sector continued to expand at a robust pace in September with the Markit Manufacturing PMI and the ISM Manufacturing PMI coming in at 53.2 and 55.4, respectively. Additionally, the weekly Initial Jobless Claims declined by 36,000 to 837,000 in the week ending September 26th.

During the Asian session on Friday, the Australian Bureau of Statistics will release the Retail Sales data, which is expected to show a 4.2% decline in August.

Technical levels to watch for