AUD/USD fails to hold on to recovery gains ahead of FOMC minutes

After dropping to its daily low at 0.7443, the AUD/USD was able to recover all of its daily losses during the European trading hours and reached its session high at 0.7484 before dropping back into the negative territory. As of writing, the pair was trading at 0.7466, down 0.17% on the day.

Earlier in the day, Moody's Investors Service announced that it downgraded China's, Australia's biggest trading partner, credit rating to A1 from Aa3 due to rising debt and slowing economic growth, which is expected to hurt the financial strength of the country's economy in coming years. Following the announcement, the AUD came under pressure and lost strength against the USD, forcing the AUD/USD pair to erase the majority of yesterday's gains.

• China: Rating downgrade by Moody’s suggest financial strength will erode in future – RBC CM

Amid a lack of fresh fundamental catalysts that could directly impact the pair's price action, AUD/USD was able to start a recovery move in the European session. However, as the investors get ready for the release of the meeting minutes from the latest FOMC meeting, the pair failed to gather further momentum, erasing its recovery gains. On the other hand, after a batch of mixed macro data from the United States, the US Dollar Index is also in a consolidation phase, now at 97.34, up 0.07% on the day.

• FOMC minutes in the limelight - Nomura
• US: House prices rise 1.4% in first quarter
• US: Existing-Home Sales slip 2.3% in April

Technical outlook

The initial hurdle for the pair aligns at 0.7500 (psychological level) followed by 0.7560 (20-WMA) and 0.7610 (Apr. 17 high). On the downside, supports could be seen at 0.7440 (daily low), 0.7330 (May 9 low) and 0.7285 (Jan. 6 low).