AUD/USD extends daily decline, inches closer to 0.71

• RBA's neutral tone weighs on the AUD on Wednesday.
• US Dollar Index preserves bullish momentum.
• Coming up: AiG Performance of Construction Index from Australia.

Following the sharp drop witnessed in the early Asian session on Wednesday, the AUD/USD pair struggled to shake off the bearish pressure and extended its declines to a 12-day low of 0.7117. As of writing, the pair was trading a couple of pips above that level, losing more than 100 pips, or 1.6%, on a daily basis.

As expected, the RBA this week announced that it kept its policy rate unchanged at 1.5%. Although the initial reaction to the RBA announcements was relatively muted, the AUD came under heavy selling pressure after Governor Lowe adopted a neutral/dovish tone while speaking at the National Press Club in Sydney on Wednesday. "Lower rates might be appropriate if the unemployment rises and inflation stalls," Lowe said. "The Board does not see a strong case for a near-term change in the cash rate."

On the other hand, the greenback continued to outperform its major rivals for the fifth straight day on Wednesday with the US Dollar Index advancing above the 96.30 mark for the first time in more than 10 days, keeping the selling pressure on the pair intact in the second half of the day. At the moment, the DXY is up 0.3% on the day at 96.36. Meanwhile, today's data from the U.S. showed that the trade deficit shrunk by more than expected in November. 

During the Asian trading hours, the AiG is scheduled to release its Performance of Construction Index, which is unlikely to help the AUD recover its losses.

Technical levels to consider

The next support for the pair could be seen at 0.7075 (Jan. 25 low) ahead of 0.7000 (psychological level) and 0.6915 (Jan. 3 low). On the upside, resistances could be seen at 0.7140 (50-DMA), 0.7185 (20-DMA) and 0.7245 (daily high).