AUD/USD recovery capped by 0.7085 amid risk-off

• US dollar weakness, Fitch rating’s affirmation led the Aussie bounce.   
• But upside appears capped amid risk-off on the global stocks, as all eyes turn to the US data flow.

The recovery in the AUD/USD pair lost legs near the 0.7085 region, as the Asian stocks saw no reprieve amid heightened risk-off trades, which usually weighs negatively on the higher-yielding currencies such as the Aussie.

The Nikkei 225 index closed down 3.75% while negative EuroStoxx futures point towards a softer opening on the European equities, as the risk-off sentiment remains the main underlying theme amid European political turmoil.

In the Asian trades, the Aussie staged a solid comeback from the key support near 0.7055 level, as US dollar slipped against its main rivals after the 10-year Treasury yields hit fresh 3-week lows.

Further, the Aussie dollar also derived support from the Fitch headlines, affirming the Australian AAA credit rating. Looking ahead, the sentiment on the European equity markets and the USD dynamics will continue to drive spot until the releases of the US macro news, with the key focus on the durable goods data.

AUD/USD Technical levels

FXStreet’s Analyst Omkar Godbole offers key technical levels for the AUD/USD pair in the day ahead.

“Resistance: 0.7106 (previous day's low), 0.7160 (Oct. 17 high), 0.7186 (50-day EMA + falling trendline).

Support: 0.7055 (session low), 0.7041 (Oct. 8 low), 0.70 (psychological support).”