AUD/USD climbs above 0.7800 as DXY pulls away from multi-week highs

The AUD/USD pair stayed relatively quiet during the first half of the day and traded in a relatively tight range around 0.7750. With the USD starting to lose its strength ahead of the American session, however, the pair gained traction and was last seen rising 0.43% on the day at 0.7803.

Earlier in the day, the Reserve Bank of Australia (RBA) left its policy rate unchanged at 0.1% as expected. In its policy statement, the RBA noted that it will not hike the policy rate until inflation is sustainably within the 2-3% target range. Moreover, the RBA reiterated that it's prepared to make adjustments to its asset purchases in response to changing market conditions. Nevertheless, the market reaction remained relatively muted.

DXY pulls away from highs as risk flows return

On the other hand, the US Dollar Index continued to edge higher after closing in the positive territory on Monday and touched its best level in nearly a month at 91.39 on Tuesday before losing its momentum. At the moment, the DXY is up 0.1% at 91.13.

In the absence of significant macroeconomic data releases, a positive shift witnessed in market sentiment seems to be making it difficult for the greenback to preserve its strength. Reflecting the improving market mood, Germany DAX and the UK's FTSE 100 indexes both gain around 0.6%. Additionally, the S&P 500 Futures, which was down 0.5% earlier in the day, is now losing 0.2%.

Later in the session, the ISM-NY Business Conditions Index and the IBD/TIPP Economic Optimism Index data from the US will be looked upon for fresh catalysts.

Technical levels to watch for