AUD/USD trades in tight range below 0.80 as DXY steadies near 90.40

• AUD/USD fails to break above 0.80.
• DXY sticks to modest recovery gains, struggles to gain momentum.

After testing the 0.80 handle and renewing its best level in more than four months there, the AUD/USD pair lost its momentum and retraced its daily advance. As of writing, the pair was trading at 0.7966, up only 5 pips on the day.

Earlier today, the data from Australia showed that home loans increased by 2.1% in November following the 0.6% contraction in October, beating the market expectation of -0.2% and easing the concerns over a possible real-estate bubble in the country. Although the AUD gathered strength against its rivals on the back of the upbeat data, the greenback's recovery later in the day didn't allow the pair to extend its gains.

After touching its lowest level in more than three years at 89.99 in the early Asian trading hours, the US Dollar Index reversed course and advanced to 90.58 in the NA session. Today's data from the U.S. showed that industrial production increased by 0.9% on a monthly basis in December and surpassed the market estimate of 0.4% while capacity utilization eased to 72 from 74. Later in the session, the Fed is going to publish its Beige Book, which shows the current state of the economic activity in the U.S. Moreover, FOMC members Evans, Kaplan, and Mester will be delivering speeches.

Technical outlook

With a daily close above 0.8000 (psychological level/daily high), the pair could aim for 0.8090 (Sep. 20 high) and 0.8125 (Sep. 8 high). On the downside, supports align at 0.7905/0.7900 (Jan. 15 low/psychological level), 0.7845 (20-DMA) and 0.7760 (200-DMA). Meanwhile, the RSI indicator on the daily graph continues to float above the 70 mark, suggesting that the pair is still technically overbought and could need to make a correction before gaining further bullish momentum.