AUD/USD plummets to fresh seven-year lows, closes in on 0.5900

• RBA injected 10.7 billion AUD into banking system through repos.
• Westpac Leading Index in Australia slumped to -0.42% from 0.03%. 
• USD funding stress continues to drive DXY higher. 

The AUD/USD pair fluctuated in a relatively tight range near the critical 0.6000 handle during the Asian trading hours but came under renewed bearish pressure ahead of the American session. As of writing, the pair was trading at 0.5920, slightly above the seven-year low it set at 0.5907 in the last minutes and was down 1.4% on the day.

As cross-currency swaps continue to reflect funding stress in the USD, the US Dollar Index (DXY) is extending its rally on Wednesday. At the moment, the DXY is up 0.44% on the day at 99.95 to keep the bearish pressure intact.

Meanwhile, the RBA's decision to inject 10.7 billion worth of liquidity into the banking system through repo operations and the disappointing Westpac Leading Index, which dropped to -0.42% in February from 0.03%, put additional weigh on the AUD's shoulders.

Additionally, the unabated risk-aversion dominating the financial markets amid the coronavirus outbreak makes it difficult for the AUD to find demand.

Building Permits and Housing Starts data from the US will be released on Wednesday but investors are likely to ignore them.

Eyes on RBA

During the Asian session on Wednesday, labour market data from Australia will be looked upon for fresh impetus. More importantly, the RBA will announce its policy measures in the face of the coronavirus outbreak.

Previewing the RBA event, “we expect the RBA to cut the cash rate to 0.25% to address the dislocation in bond markets via an Asset Purchase Program and formally announce Yield Curve Control for implementing QE,” said TD Securities. “We don't expect the RBA to cut 50bps as this would push the floor of the interest rate corridor into negative territory.”

Technical levels to watch for