AUD/USD inches closer to 0.78 as DXY struggles to recover

• Commodity-linked currencies remain strong.
• US Dollar Index looks to close second straight day lower.
• Consumer confidence in the U.S. drops in December.

The AUD/USD pair advanced to its highest level in nearly two months at 0.7778 on Wednesday as commodity-sensitive currencies continue to outperform their rivals. As of writing, the pair was trading at 0.7775, up 0.62% on the day.

Copper-exporter Australia'a dollar gathered strength on Wednesday as investors reacted to rising copper prices. Copper futures today surged to its highest level in nearly 4 years at 3.288 as the global economic recovery is expected to ramp up the demand for the metal in 2018. 

On the other hand, despite the low trading volume on the day, the US Dollar Index is having a tough time retracing its recent losses. Today's data released by the Conference Board showed that the Consumer Confidence in the United States weakened with the headline index easing to 122.1 in December from 128.6 in November. "The decline in confidence was fueled by a somewhat less optimistic outlook for business and job prospects in the coming months," the official report read.

With no significant macroeconomic data releases in the remainder of the week, the pair's price action is likely to continue to be dominated by the copper prices.

Technical outlook

Following today's upsurge, the pair is looking to close the day above the 100-DMA level for the first time since late October. However, the RSI indicator on the daily graph recently rose above the 70 mark, suggesting that the pair is technically overbought and could stage a technical correction before extending its gains. On the upside, the initial resistance aligns at 0.7800 (psychological level) ahead of 0.7835 (Oct. 23 high) and 0.7885 (Oct. 19 high). On the downside, supports could be seen at 0.7755 (100-DMA), 0.7720 (200-DMA)and 9ç7650 (Dec. 21 low).