AUD/USD erases daily gains as dollar gains momentum

AUD/USD failed to hold to gains and pulled back during the American session. The pair peaked earlier at 0.7674, hitting the highest level in two weeks, boosted by risk appetite, a weak US dollar and the rally of the AUD/NZD pair.

On US trading hours it turned to the downside and moved with that bias during the entire session. Recently dropped to test daily lows at 0.7625 but it managed to hold on top. The pair was about to end the day around 0.7634, at the same level it closed yesterday but still more than 50 pips above the level it had before the Fed’s decision.

The US central bank left interest rate unchanged (as mostly expected) and said that the case for a rate hike has strengthened but decided to wait for more evidence. The US dollar weakened in the currency market despite the fact that three FOMC members voted for a rate hike.

The recent correction in the AUD/USD pair took place as the US dollar recovered ground and amid a retreated in gold prices. XAU/USD dropped from $1344 to $1336.

Technical outlook

“Despite holding above 0.7600, the short-term picture favors a downward extension, as in the 1-hour chart, the price is now accelerating below its 20 SMA, while the technical indicators entered negative territory, maintaining a strong bearish slope”, said Valeria Bednarik, Chief Analyst at FXStreet.

According to her, a break below the 0.7600 area could put the Aussie under some selling pressure, “with scope to retest the 0.7490 region, should dollar's demand resurges this Friday.”