AUD/USD stages modest recovery, stays in the red near mid-0.76s

• Aussie started the day under pressure amid weak Chinese data.
• A late retreat seen in the DXY opens the door for a modest recovery.
• Markets' focus remains on tomorrow's FOMC meeting.

After starting the day under pressure and erasing yesterday's gains during the Asian trading hours amid weaker-than-expected non-manufacturing PMI data from China, the AUD/USD pair continued to push lower to touch a fresh daily low at 0.7640 during the early NA session. However, the pair gained traction in the last hour and was last seen trading at 0.7660, still down 0.4% on the day.

Month-end flows impact the DXY action

A sudden drop witnessed in the US Dollar Index seems to be the primary driver of this slow recovery. After edging higher to a new daily high at 94.60 on the back of upbeat macroeconomic data, the US Dollar Index erased its daily gains to turn negative below 94.50. Although no fundamental catalysts were present behind that fall, the London close may have triggered large end of the month liquidations. At the moment, the index is at 94.36, losing 0.02% on the day.

• US: Compensation costs for civilian workers increased 0.7% in September
• US: October Chicago Business Barometer climbs to 66.2

With a lack of significant data releases in the remainder of the session and tomorrow, the pair is likely to remain in its recent range before the FOMC publishes its monetary policy statement during the NA session on Wednesday. Valeria Bednarik, Chief Analyst at FXStreet, in her FOMC preview report points out, "as for the Federal Reserve and as said above, the Central Bank is not expected to take any actions this time, but investors will be eagerly watching for clues to confirm or deny a December hike, and whatever 2018 will bring on monetary policy. Next Fed's chair announcement will probably be more relevant than this particular "non-live" meeting."

Technical levels to consider

With today's retreat, the RSI indicator on the daily graph edged lower to the 30 mark, suggesting that the sellers are likely to have a tough time remaining in control. On the downside, the initial support aligns at 0.7625 (Oct. 27 low) ahead of 0.7570 (Jul. 25 low) and 0.7500 (psychological level). On the upside, resistances could be seen at 0.7710 (200-DMA), 0.7780 (20-DMA) and 0.7880 (Oct. 20 high/50-DMA).

• AUD/USD seen at 0.82 by year-end – TDS