AUD/USD clings to daily gains above 0.71

The AUD/USD pair broke above the 0.71 mark on Thursday as the initial market reaction to the soft inflation data forced the greenback to extend its losses against its rivals. After advancing to 0.7130, the pair struggled to push higher and was last seen trading at 0.7115, adding nearly 1% on a daily basis.

The USD's market valuation today seems to be the primary driver of the pair's price action. The data published by the U.S. Bureau of Labor Statistics earlier today showed that the inflation, measured by the core CPI, remained steady at 0.1% and 2.2% on a monthly and yearly basis, respectively, in September to fall short of analysts' estimates. After testing the 95 mark, the US Dollar Index staged a modest recovery and was last seen down 0.28% on the day at 95.20.

On the other hand, following yesterday's bloodbath, major equity indexes in the U.S. started the day relatively quiet to help risk-sensitive currencies such as the AUD stay resilient against its rivals. However, all 11 major sectors of the S&P 500 continues to stay in the red with the Energy Index leading the losses with a 1.8%, and if markets witness a similar sell-off to the one seen yesterday, the pair could start erasing its gains.

"Equities have some real concerns, rising interest rates, trade contention with China, and the natural worry over an aging bull market. But stocks also have enormous profits. The S&P  500 was up 59 percent from its January 2016 low at Wednesday's open. Yesterday's plunge was as much about repositioning  and profits as it was about tech fears on trade and the possibility of lower growth next year," FXStreet Senior Analyst Joseph Trevisani said.

Technical levels to consider

The first resistance for the pair aligns at 0.7130 (daily high) ahead of 0.7175 (20-DMA) and 0.7215 (50-DMA). On the downside, supports are located at 0.7100 (psychological level), 0.7060 (daily low), and 0.7000 (psychological level).