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AUD/USD rises toward 0.76 on sudden DXY drop

  • AUD/USD gains more than 30 pips in the last hour. 
  • US Dollar Index slumps below 93 despite positive data from the U.S.

The AUD/USD pair, which was moving sideways a little above mid-0.75s, gained traction in the last hour and touched a fresh session high at 0.7591. As of writing, the pair was trading at 0.7585, adding 0.18% on the day.

Why is the USD weakening?

The pair's recent upsurge seems to be a product of a broad-based selling pressure witnessed on the greenback. After inching higher to a new weekly top at 93.46, the US Dollar Index plummeted below the 93 handle in a matter of minutes and was last seen at 92.77, where it was losing 0.5% on the day. Although there were no apparent catalysts behind this sudden fall, news of White House planning to replace Secretary of State Rex W. Tillerson with current CIA director Mike Pompeo seems to have triggered a sell-off. 

However, the only market reaction to the news came from the greenback. In fact, the 10-year US Treasury-bond yield is moving sideways in the positive territory while major equity indexes in the U.S. are extending their upside to fresh all-time highs.

Earlier in the day, the data from the U.S. showed that the core-PCE price index, the Fed's preferred measure of inflation, came in line with market expectations at 0.2% and 1.4% on a monthly and yearly basis respectively. Moreover, weekly initial jobless claims decreased by 2K to 238K for the week ending November 24.

In the Asian session on Friday, the Australian Industry Group (AIG) is going to publish its Performance of Manufacturing Index, which is unlikely to receive any significant reactions from the market.

Technical outlook

With this late rise, the RSI indicator on the daily graph started to edge higher towards the 50 mark, suggesting that the bearish momentum is losing strength. On the upside, the pair could encounter the immediate resistance at 0.7600 (psychological level/20-DMA) ahead of 0.7645 (Nov. 27 high) and 0.7710 (200-DMA). On the downside, supports align at 0.7555 (daily low), 0.7500 (psychological level) and 0.7420 (May 31 low).

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