AUD/USD consolidates daily gains near mid-0.79s

• AUD/USD refreshes multi-month highs on Monday.
• DXY struggles to retrace its daily drop.

With the heavy selling pressure on the greenback remaining unabated on Monday, USD denominated pairs preserved their bullish momentum. The AUD/USD pair reached its highest level since late September at 0.7967 during the European session before going into a consolidation phase. As of writing, the pair was trading at 0.7958, gaining 0.52% on the day.

Despite heightened expectations of the Fed making another 25bps rate hike in March, the buck is having a rough time finding demand as investors remain focused on European currencies. Later in the session, the pair's price action is likely to stay subdued with the trading volume thinning out amid the bank holiday in the U.S. due to the observance of Martin Luther King Day. At the moment, the US Dollar Index is down 0.55% on the day at 90.12.

In the early trading hours of the Asian session on Monday, the University of Melbourne released the TD Securities Inflation data, which dropped to 2.3% from 2.7% on a yearly basis in December. On Tuesday, New Motor Vehicle Sales from Australia is going to be released but the data is unlikely to have a significant impact on the pair. The only noteworthy data from the U.S. will be the NY Empire State Manufacturing Index. 

Technical outlook

The RSI indicator on the daily graph continues to float above the 70 mark, suggesting that the pair is still technically oversold. However, unless the DXY makes a decisive correction, the pair could extend its gains. 0.8000 (psychological level) could be seen as the initial hurdle ahead of 0.8090 (Sep. 20 high) and 0.8125 (Sep. 8 high). On the downside, supports could be seen at 0.7900 (daily low/psychological level), 7820 (20-DMA) and 0.7750 (200-DMA).