AUD/USD recovers modestly from multi-year lows, trades above 0.6100

• US Dollar Index retreats to 98 area following a rebound in American session.
• Wall Street's main indexes suffer heavy losses amid flight to safety.
• Coming up from Australia: RBA Meeting Minutes and House Price Index. 

The AUD/USD pair dropped to its lowest level since November 2008 at 0.6080 during the early trading hours of the American session but staged a modest rebound. As of writing, the pair was trading at 0.6136, still erasing 0.75% on a daily basis. 

Although the pair started the week with a bearish gap amid a barrage of coronavirus headlines over the weekend, the Federal Reserve emergency policy action caused the USD to come under strong selling pressure and provided a boost to AUD/USD. 

After adding more than 150 pips in a matter of minutes with the initial reaction to the Fed's 100 basis points rate cut, the pair quickly retraced its upsurge as the Reserve Bank of Australia (RBA) voiced its commitment to support the economy.

"The Reserve Bank stands ready to purchase Australian government bonds in the secondary market to support the smooth functioning of that market," the RBA said and further announced that the bank will announce further policy measures on Thursday.

Moreover, the data from China showed that Industrial Production in February declined by 13.5% on a yearly basis to put additional weight on the AUD's shoulders.

USD stays relatively resilient against its rivals

On the other hand, the US Dollar Index erased its earlier losses as the risk-off flows into the safer USD outweighed the negative impact of the Fed's policy announcements. Nevertheless, the index struggled to preserve its recovery momentum and retreated toward the 98 handle from the 98.50 region and allowed the pair to pull away from its lows.

During the Asian session on Tuesday, the RBA will release the minutes of its March policy meeting. The economic docket will feature House Price Index for the fourth quarter as well.

Technical levels to watch for