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  • AUD/USD sits comfortably around two-week top, buyers catch a breather off-late.
  • Market sentiment turned cautiously optimistic ahead of US CPI, stimulus.
  • Aussie Westpac Consumer Sentiment and China inflation data will offer immediate direction.

AUD/USD wavers around 0.7735, after recently rising to the highest level in two weeks with 0.7742 mark, during the initial Asian trading on Wednesday. In doing so, the aussie pair pauses after a three-day winning streak that pierced monthly resistance.

The latest stop in the AUD/USD bull-run could be traced from cautious sentiment ahead of the key US inflation data and President Joe Biden’s $1.9 trillion stimulus. The mood could also be attributed to the US dollar’s corrective pullback tracking moves of the Treasury bonds.

US dollar bears catch a breather around 90.45 after declining to the lowest in eight days on Tuesday. On the same line, US 10-year Treasury yields dropped for the first time in the last eight days after rising to the highest since March on Monday.

Although mixed sentiment data from Australia and the US played their roles to probe the market optimists, the cautious mood ahead of the US and Chinese inflation figures should be considered the key for the latest shift in the risks. Also, the latest developments concerning the much-awaited US covid relief package increases the market’s anxiety. Elsewhere, covid vaccinations are positive to the risks but the tussle between Australia and China, coupled with the US-Iran, crosses the likely trade optimism at the developed nations like the US, the UK, Europe and Australia.

Amid these plays, Wall Street benchmarks closed mixed on Tuesday while commodities stopped the latest run-up by the end of the North American trading session.

Moving on, Australia’s Westpac Consumer Confidence data for February, expected to improve from -4.5% to -3.0%, will precede HIA New Home Sales, +14.1% forecasts versus +32.5% prior, to decorate the domestic calendar. However, the key will be China’s January month Consumer Price Index (CPI) and Producer Price Index (PPI) wherein AUD/USD bears will look for a bearish sign, contrary to the mixed expectations, to test the upside momentum. Even so, any surprise news of the US stimulus, coupled with major positives from the covid vaccine front, can keep the pair firmer.

Technical analysis

Sustained trading above a downward sloping trend line from January 13, currently around 0.7720, as well as a 21-day SMA level of 0.7695, keeps AUD/USD buyers hopeful to attack a five-week-old resistance line around 0.7770.