AUD/USD recovers toward 0.73 as risk sentiment improves

• AUD/USD drops to a fresh 20-month low at 0.7225 on Monday.
• The US Dollar Index eases off highs, eases below 96.30.
• Wall Street records modest gains in the early NA session.

The AUD/USD pair touched its lowest level since January 2017 at 0.7225 on Monday as the risk-sensitive aussie struggled to find demand in the risk-off environment. However, with the USD/TRY pair finally stabilizing below the critical 7 mark, the market sentiment improved a little in the second half of the day and the AUD/USD pair started erasing its daily losses. As of writing, the pair was down 0.1% on the day at 0.7290.

The US Dollar Index, which continued to gather strength amid flight-to-safety, lost its momentum after touching its highest level of the year at 96.52 and started consolidating its daily upside. At the moment, the index looks relatively quiet near the 96.20 mark. The fact that there won't be any macroeconomic data releases from the United States on Monday is likely to leave the USD at the mercy of the markets' risk perception.

Meanwhile, copper futures are staying in the positive territory on Monday to help the AUD stay resilient against the buck. During the Asian session on Tuesday, Westpac Consumer Confidence and the second quarter wage inflation data will be looked upon for fresh impetus.

Technical outlook

The pair could face the first support at 0.7225 (daily low) ahead of 0.7160 (Dec. 23, 2016, low) and 0.7100 (psychological level). On the upside, resistances align at 0.7300 (psychological level/daily high), 0.7375 (Aug. 10 high) and 0.7475 (100-DMA).