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  • AUD/USD struggles to keep latest bounce off 0.7665.
  • Risks dwindle amid virus woes, stimulus hopes and Sino-American tussle.
  • Wall Street closes in red despite initial gains, US 10-year Treasury yields stay strong above 1.0%.
  • A light calendar keeps risk catalysts on the driver’s seat.

AUD/USD stays defensive around the 0.7700 threshold, despite the latest corrective pullback, during early Tuesday morning in Asia. The aussie pair dropped to the lowest in one week the previous day amid broad US dollar strength. However, a lack of major directives and a strong support line seems to have triggered the recent bounce. Considering a light flow of catalysts in Asia, risk headlines will be the key to watch.

More clues eyed…

Although the coronavirus (COVID-19) spread and the US political jitters join tension between America and China to challenge the risks, expectations of heavy stimulus from Washington take the support of vaccine hopes to keep the bears away. Even so, a lack of clarity requires more data/events to direct the market moves.

That said, China’s upbeat inflation numbers for December and Australia’s welcome figures of December’s TD Securities Inflation, coupled with more than expected Retail Sales for November, couldn’t please AUD/USD buyers as challenges to the risks stayed strong.

Among them, escalating Sino-American tussle and the covid fears are major ones. While chatters over further sanctions on China and US-Taiwan friendship suggest the geopolitical uncertainty, sustained jump in virus numbers and covid variants mention that the worst isn’t over. However, the vaccinations are trying their best to defy virus woes, even against the strains. Also on the positive side are concerns over the US fiscal stimulus on Joe Biden’s victory in the US 2020 elections. Though, US President Donald Trump’s impeachment and intermediate comments from the Fed policymakers, after last week’s downbeat US jobs report, offer mixed scenario.

Against this backdrop, Wall Street benchmarks fail to keep early Monday’s gains while closing in the red. However, the US 10-year Treasury yields remain near multi-month high and flashed 1.14% quote the last.

Looking forward, an absence of major data from Australia, as well as China, keeps AUD/USD trades confused and hence the persistent US dollar strength can challenge the buyers. However, upbeat clues over the US aid package and/or virus may help the risk barometer defy sellers’ entries.

Technical analysis

Having bounced off the 10-week-old support line, currently around 0.7660, AUD/USD buyers need to stay positive beyond 0.7740/45 before eyeing the monthly high, also the highest since March 2018 around 0.7820.