AUD/USD clings to modest gains above 0.7600 mark, lacks follow-through

• The upbeat market mood extended some support to the perceived riskier aussie.
• Dovish comments by RBA Governor Lowe kept a lid on any strong gains for the pair.
• An uptick in the US bond yields underpinned the USD and further capped the upside.

The AUD/USD pair extended its sideways consolidative price action through the early European session and remained confined in a range, around the 0.7615-20 region.

The pair built on the overnight modest bounce from the 0.7565-60 region, or six-week lows and edged higher during the first half of the trading action on Wednesday amid the prevalent risk-on flows. Signs of progress towards additional US stimulus measures fueled hopes for a strong global economic recovery and remained supportive of the upbeat market mood.

It is worth reporting that Democrats in the US Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion COVID-19 relief package to bypass Republicans. Democrats opened debate on a fiscal 2021 budget resolution with coronavirus aid spending instructions, unlocking a legislative tool to pass stimulus spending amid Republican opposition.

This, along with positive news about the development of another COVID-19 vaccine, further boosted investors’ confidence and extended some support to the perceived riskier Australian dollar. Reports on Tuesday indicated that the Sputnik V coronavirus vaccine developed in Russia showed an effectiveness rate of 91.6% in the phase-3 trial.

That said, a combination of factors held kept a lid on any meaningful upside for the AUD/USD pair. Expectations of a larger government borrowing continued pushing the US Treasury bond yields higher and underpinned the US dollar. Apart from this, dovish comments by RBA Governor Philip Lowe also held bulls from placing any aggressive bets.

Meanwhile, the AUD/USD pair’s inability to gain any meaningful traction favours bearish traders and supports prospects for further weakness. This makes it prudent to wait for some strong follow-through buying before confirming that the recent corrective slide from multi-year tops is over and positioning for any further appreciating move.

Market participants now look forward to the release of the US ISM Services PMI for some impetus later during the early North American session. Apart from this, the broader market risk sentiment and the US stimulus headlines might influence the USD price dynamics. This could further contribute to produce some short-term opportunities around the AUD/USD pair.

Technical levels to watch