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  • AUD/USD is posting modest daily losses on Friday.
  • RBA Governor Lowe’s dovish tone keeps AUD/USD’s upside limited.
  • US Dollar Index fluctuates in relatively tight range above 91.00.

The AUD/USD pair is posting modest daily gains above 0.7600 and looks to snap its three-day losing streak. However, the pair’s recovery seems to be a technical correction amid a dovish shift in the Reserve Bank of Australia (RBA) policy outlook. As of writing, AUD/USD was up 0.17% on the day at 0.7619.

On Tuesday, the RBA left its policy rate unchanged at 0.1% as expected but announced that it decided to purchase an additional AUD100 billion of bonds from mid-April. In a press conference on Wednesday, RBA Governor Phillip Lowe said that the AUD would have an “unwelcome upward pressure” without the extension to the quantitative easing programme.

Upbeat market mood limits USD’s gains

On the other hand, the US Dollar Index seems to be struggling to extend its rally and is trading in a narrow band above 91.00 on Wednesday. Earlier in the day, the data from the US showed that the business activity in the service sector continued to expand at a strong pace in January but the market reaction was relatively muted.

Meanwhile, heightened optimism for additional fiscal stimulus in the US is helping the market mood improve and allowing AUD/USD to stay in the positive territory. At the moment, the S&P 500 Index is up 0.5% on the day at 3,845. 

White House spokeswoman Jen Psaki said on Wednesday that Democratic Senators and President Joe Biden have agreed on the need to move swiftly to get $1,400 checks to Americans.

Technical levels to watch for