AUD/USD steadies around 0.7070 as focus shifts to FOMC

• AUD/USD climbed to a fresh multi-year high on Wednesday.
• Business activity in Australia’s private sector expanded at a strong pace in December.
• Risk flows continue to dominate financial markets ahead of Fed’s policy decisions.

Supported by the risk flows and the upbeat macroeconomic data releases from Australia, the AUD/USD pair advanced to its highest level since June 2018 at 0.7580. With investors moving to the sidelines ahead of US data releases and the FOMC’s policy announcements, the pair is consolidating its gains and was last seen rising 0.22% on the day at 0.7572.

The Commonwealth Bank’s Manufacturing and Services PMI in December improved to 57.4 and 56, respectively, to show that the economic activity in Australia’s private sector continued to expand at a robust pace. Additionally, the Westpac Leading Index rose to 0.46% in November from 0.3%.

Eyes on FOMC

On the other hand, heightened hopes for a stimulus deal in the US and Brexit optimism keep the risk-on market mood intact and continue to hurt the greenback. At the moment, the US Dollar Index is down 0.32% on the day at 90.18, helping AUD/USD stay in the positive territory.

In the second half of the day, the IHS Markit will publish the preliminary Manufacturing and Services PMI reports for the US. Moreover, the FOMC will announce its policy decisions following the last meeting of 2020. 

Although investors don’t expect the Fed to make any changes to its monetary policy, the updated economic projections and FOMC Chairman Powell’s press conference will be looked upon for fresh clues regarding possible adjustments to asset purchase program.

Technical levels to watch for