AUD/USD inches closer to 0.71 as DXY extends slide

• Australian business sentiment data beat expectations.
• Home loans decline by more than expected.
• US Dollar Index fails to hold above 97.

After closing the previous day at its lowest level since early January at 0.7055, the AUD/USD pair staged a modest rebound on Tuesday and erased almost all of the losses it suffered n Monday. As of writing, the pair was up 0.5% on the day at 0.7093.

Earlier today, the data from Australia showed that home loans declined by 6.1% in December to miss the market expectation for a 2% decrease. However, the National Bank of Australia's monthly report revealed that the Business Confidence and Business Conditions both improved in January to help the AUD gather strength against its rivals.

Additionally, the broad-based selling pressure surrounding the USD provided an additional boost to the pair throughout the day. Following the 8-day rally that seems to have found resistance above the 97 mark, the US Dollar Index started to retrace its gains and was last seen losing 0.18% on the day at 96.90. Later in the NA session, investors will be paying close attention to FOMC Chairman Powell and Fed members Geroge and Mester's speeches for fresh clues on the short-term monetary policy outlook.

In the early Asian session on Wednesday, Westpac will publish the Consumer Confidence Index data for February.

Technical levels to consider

The pair could face the first resistance at 0.7100 (Feb. 11 high/psychological level) ahead of 0.7130 (50-DMA) and 0.7160 (20-DMA). On the downside, supports are located at 0.7050 (daily low), 0.7000 (psychological level) and 0.6920 (Jan. 3 low).