AUD/USD slides further below mid-0.7100s, fresh session low

The AUD/USD pair added to its intraday losses and refreshed daily lows, around the 0.7140-35 region during the early European session.

The pair failed to capitalize on this week's positive move and witnessed a turnaround from the 0.7200 neighbourhood, or 15-month tops set on Wednesday in reaction to a more dovish FOMC statement. As was widely expected, the Fed decided to leave its benchmark rate unchanged at 0-0.25% and pledged to keep rates near zero until it is confident that the economy has weathered the recent events.

As investors looked past the key event, the US dollar staged a goodish intraday rebound from more than two-year lows and prompted some fresh selling around the AUD/USD pair. Adding to this, a weaker tone surrounding the US equity futures underpinned the greenback's relative safe-haven status and further collaborated towards driving flows away from the perceived riskier Australian dollar.

The aussie was also pressured by Thursday's weaker-than-expected domestic data, which showed that Building Approvals fell to an eight-year low in June. In fact, approvals for the construction of new homes were down 4.9% during the reported month. The reading was better than the 15.8% slump recorded in the previous month but was worse than the 2% decrease anticipated by the market.

Meanwhile, the impasse over the next round of the US fiscal stimulus measures might cap the attempted USD recovery. It is worth reporting that the US congressional Republicans and Democrats have been struggling to reach a deal ahead of some earlier measures that expire this week. This, in turn, should hold the USD bulls from placing aggressive bets and help limit losses for the AUD/USD pair.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the pair might have already topped out near the 0.7200 mark and positioning for any meaningful corrective slide.

Market participants now look forward to the US economic docket, highlighting the Advance Q2 GDP report. The world's largest economy is anticipated to have collapsed by a record 34.1% during the second quarter of 2020. The data will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.

Technical levels to watch