AUD/USD slumps to 0.7650 area on strong DXY rebound

• AUD/USD is falling sharply in the second half of the day.
• Wall Street’s main indexes are posting large losses.
• US Dollar Index rises toward 90.00 on risk aversion.

The AUD/USD pair started the new year on a firm footing and came within a couple of pips of the multi-year high it set at 0.7743 last week. However, the souring market forced the pair to decline sharply in the second half of the day. As of writing, AUD/USD was down 0.65% on the day at 0.7653.

DXY turns north as investors seek refuge

Ahead of the first risk event of 2021, the runoff election for two Senate seats in Georgia, investors seem to be moving to the sidelines. Additionally, the surging number of COVID-19 infections, especially in Europe, revive concerns over nationwide lockdowns hurting the global economic recovery.

Reflecting the negative shift in sentiment, Wall Street’s three main indexes are down more than 2% after opening at fresh all-time highs. Meanwhile, the US Dollar Index is virtually unchanged on the day at 89.90 with the greenback finding demand as a safe-haven.

There won’t be any macroeconomic data releases from Australia on Tuesday and the risk perception is likely to remain as the primary driver of financial markets. Later in the day, the ISM Manufacturing PMI report will be featured in the US economic docket.

Technical levels to watch for