AUD/USD stays deep in red near 0.7150 ahead of US GDP data

• AUD/USD falls on dismal Australian data, USD strength.
• US Dollar Index erases majority of Wednesday’s losses.
• Economic activity in US is expected to contract by more than 30% in Q2.

The AUD/USD pair posted its highest daily close since April 2019 at 0.7197 on Wednesday but reversed its direction on Thursday. As of writing, the pair was down 0.52% on the day at 0.7148.

DXY gains traction on Thursday

Following its two-day meeting, the FOMC announced on Wednesday that it left its policy rate unchanged as expected. In its statement, the Fed reiterated that it remains committed to using its “full range of tools” to help the economy amid the coronavirus crisis.

During the press conference, FOMC Chairman Jerome Powell refrained from mentioning the possibility of negative rates or yield curve control but acknowledged signs of a slowdown in the recovery with rising COVID-19 cases.

With the initial reaction, the US Dollar Index (DXY) continued to push lower toward 93.00 but staged a decisive rebound on Thursday as the risk-averse environment provided a boost to the USD. At the moment, the DXY is up 0.28% on the day at 93.52.

Later in the session, the second-quarter GDP data, which is expected to show a contraction of 34.1% in the economic activity, will be watched closely by the market participants. If the GDP data comes in worse than expected, the USD could continue to gather strength against its rivals and put additional weight on AUD/USD’s shoulders.

Earlier in the day, the data from Australia showed that the ANZ’s Business Confidence and the Activity Outlook indexes continued to worsen in July. Additionally, Building Permits in the Country declined by 4.9% on a monthly basis in June.

Technical levels to watch for