AUD/USD advances to fresh multi-month highs, 0.79 in touching distance

• DXY stays quiet near daily lows.
• Improved market sentiment and commodities' performance strengthen the AUD.

The AUD/USD pair gained traction in the US afternoon and edged higher to its best level since mid-September at 0.7890. As of writing, the pair was trading a couple of pip below that recent high, adding 0.54% on the day.

The pair's latest leg up seems to be fueled by the improving market sentiment, which ramps up the demand for risk-sensitive currencies such as the AUD. Moreover, the uninterruptable rally of crude oil prices provides an additional boost in the NA session. The barrel of WTI broke above the $64 threshold to refresh its highest level in more than three-years, allowing the S&P 500 Energy Sector (SPNY) to become the best performing sector of the day in Wall Street with a rise of more than 2%.

Meanwhile, the US Dollar Index, which erased yesterday's gains after the PPI data from the United States showed a monthly contraction in December; struggles to recover its losses. The DXY was last seen down 0.5% on the day at 91.65.

Later in the session, William Dudley, the president of the Federal Reserve Bank of New York, is going to be delivering a speech. However, it's very unlikely that Dudley would provide hawkish enough comments to help the index retake the 92 mark.

Technical outlook

The pair could encounter the first technical resistance at 0.7900 (psychological level) ahead of 0.7965 (Sep. 24 high) and 0.8000 (psychological level). On the downside, supports could be seen at 0.7815/10 (Jan. 4 low), 0.7745 (200-DMA) and 0.7650 (Dec. 21 low). With today's rise, the RSI indicator on the daily graph rose above the 70 mark, showing technically overbought conditions.