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The Australian dollar slightly changed against  its U.S. counterpart on Wednesday, while the New Zealand dollar significantly dropped ahead of the Reserve Bank of New Zealand’s rate decision scheduled the next day.     

AUD/USD holds steady at 0.7630.

The greenback found support after Minneapolis Federal Reserve Bank President Neel Kashkari cited on Tuesday that the U.S. central bank should moderately accommodate the monetary policy.  

The markets responded after Philly Fed President Patrick Harker said he would support raising the interest rates in March.

Meanwhile, the U.S. trade deficit narrowed to $44.3 billion in December, sending the dollar higher on Tuesday amid increasing export demands.  

Based on the reports, the U.S. trade deficit stood at a four-year high in 2016 at $502.3 billion, up from an earlier reading of $500.4 billion in 2015.

NZD/USD traded down 0.10% to settle at 0.7292, marking a three-month peak of 0.7376.

There are speculations that the RBNZ will leave the rates on hold Thursday, but investors are expected to closely watch for any indications over the central bank’s future policy decisions.

The U.S. dollar index, which gauges the dollar’s strength against a basket of major peers rallied 0.09% at 100.47, suggesting a one-week high of 100.69.

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Forex Reserve Data Drags Aussie

The Australian dollar was down on Wednesday with three straight losses after it has repeatedly failed to breach a key chart resistance level and on  the strengthening dollar.  

The Aussie declined 0.1 percent and settled at US$0.7621, significantly away from a three-month peak of US$0.7696.

The currency missed to break through critical resistance at 77 US cents for four straight sessions in a row led by the heightening political uncertainty in Europe in the wake of a slew election this year.

Further, the Aussie has been considered as a liquid proxy for China plays after it was also dragged by the disappointing forex reserves data, which stood below the eyed level of $3 trillion.   

The chart below illustrates AUD/USD price movement amid the disappointing forex reserve data.

Given a clear consolidating path of the pair, market participants are still holding their positions as there could be signs that the price would rally.

The pair is currently showing signs of consolidation, which traded in a light trading volume and tested resistance 0.76325. The price is seen drifting away from its resistance and could signal a bullish tone if it will break through.

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Conclusion

As the current stance of the pair is in a consolidating path, we conclude that investors would closely watch the candle to break through its critical resistance.

Moreover, market participants are recommended to still wait on the sidelines until further notice of the next supporting candle.

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