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  • AUD/USD remains strong despite pullback from 0.7716, flirts with the 0.7700 thresholds off-late.
  • US dollar weakness, risk-on mood favored bulls amid light calendar.
  • US stimulus, vaccine optimism propelled reflation trades, US Treasury yields.
  • Australia’s NAB Business Confidence, Conditions for January can entertain traders but risk catalysts remain as the key.

AUD/USD wavers around 0.7700 during the early Asian session on Tuesday. The aussie pair rose for the second consecutive day while rising to the fresh two-week top amid risk-on mood as well as the US dollar weakness on Monday. Although US President Joe Biden’s $1.9 trillion covid relief package is helping the risks, chatters surrounding reflation and the US treasury yields favoring the quote also gained momentum off-late.

No major data but the mood is high…

Despite sparse economic details to start the week, AUD/USD managed to entertain the traders as the US dollar index (DXY) extended its pullback from a two-month high while risks remained elevated on stimulus and virus vaccine hopes.

In the latest update, US House Republican leader Mitch McConnel said that the Democrats have decided to go at virus relief alone. Earlier, the Senate has passed the much-awaited aid package proposal to give it back to Congress for further details. While highlighting the need for the stimulus, US Treasury Secretary Janet Yellen and the majority of Fed members don’t hesitate to take a higher number to witness recovery in 2021.

Also on the positive side were the globally receding coronavirus (COVID-19) cases, except finding the second infection in Melbourne, as well as covid vaccinations. Additionally, news that the Australian Ambassador to the US urged America to reconsider transatlantic partnership also favors risks.

It’s worth mentioning that the latest efforts from the global policymakers to pump the economy seem to have renewed the reflation risks. The same could be witnessed in the latest demand of the US treasury yields whereas the 10-year note marked a jump to a fresh high since March 2020.

Elsewhere, China’s arrest of Aussie tv anchor and the US-Iran tension is on the table but gained a little acceptance from the market players.

Against this backdrop, Wall Street gained around 1.0% by the end of Monday’s trading.

Looking forward, National Australia Bank’s (NAB) Business Confidence and Business Conditions figures for January, expected 8 and 11 versus 4 and 14 respectively, can offer immediate direction to AUD/USD. However, major attention will be given to the qualitative factor concerning the risks.

Technical analysis

A clear break of 0.7645/40 resistance, now support, as well as 21-day SMA, favor AUD/USD bulls to attack a downward sloping trend line from January 14, currently around 0.7730.