AUD/USD rebounds toward 0.7150 as DXY continues to erase gains

• AUD/USD is staging a steady recovery after dropping to 0.7050.
• US Dollar Index continues to pull away from monthly highs.
• Eyes on US election results, mid-tier data releases from US.

The broad-based USD strength in the early trading hours of the Asian session caused the AUD/USD pair to slump to a daily low of 0.7050. With the greenback struggling to preserve its strength, however, the pair reversed its direction and staged a steady rebound. As of writing, AUD/USD was down 0.42% on a daily basis at 0.7130.

US election headlines drive USD's valuation

With the early results from the US presidential election showing stronger-than-expected support for US President Donald Trump, the risk rally, which was triggered on hopes of a blue wave, lost its momentum and provided a boost to the USD.

After losing more than 0.7% on Tuesday, the US Dollar Index (DXY) surged to a fresh monthly high of 94.30 to reflect the broad-based USD strength. However, former Vice President Joe Biden started to gain traction in some key states and allowed risk flows to return to markets. At the moment, the DXY is still up 0.22% on the day at 93.55.

US Elections: The second-best thing to a blue wave is a Trump win.

Meanwhile, the S&P 500 futures are up 0.75% on the day, confirming the positive shift in market sentiment. If Wall Street's main indexes start the day decisively higher, the USD could come under a renewed selling pressure and help AUD/USD push higher.

Later in the session, the ADP Employment Change, Trade Balance, Markit Services PMI and ISM Services PMI data will be featured in the US economic docket.

Technical levels to watch for