AUD/USD looks to test multi-year tops near 0.7740

• AUD/USD extends gains above 0.7700 amid USD weakness.
• Optimism over vaccines, Georgia run-off vote offset covid growth.
• Stronger yuan and higher S&P 500 futures support the aussie.

AUD/USD is inching closer to the 2020 highs reached at 0.7743, as the bulls have tightened their grip heading into the US ISM Manufacturing PMI release and Georgia’s run-off elections.

The aussie was the best performer among the G10 currencies last year and has started the year 2021 on a solid footing. The part of the recent surge in the major can be attributed to ongoing weakness in the US dollar while strengthening of the Chinese yuan also offers support to the bulls.

With the Chinese economic recovery gaining momentum and prospects of accommodative policy stance likely to be maintained by the Fed is weighing on the USD/CNY. The Chinese yuan hit the highest level since June 2018 at 6.4303 vs. the greenback earlier today.

Meanwhile, AUD/USD also benefits from the coronavirus vaccine-driven economic optimism despite the key global economies battling the covid surge and fresh lockdowns.

The upbeat momentum witnessed across the commodities space also seems to be boding well for the resource-linked aussie. Gold hit two-month tops of $1946 while copper almost tested the critical $8K barrier on the London Metal Exchange (LME).

Markets also remain hopeful of a sweeping Democrat win in Georgia’s senate race, which will pave the way for additional fiscal support. This could render positive for higher-yielding/ risk assets such as the aussie.

In the meantime, the pair will continue to draw support from the US dollar’s softness, as attention turns towards the US ISM Manufacturing PMI release for December.

AUD/USD technical levels

“An upside break of 21-bar SMA, at 0.7704 now, will eye for the recent highs marked around 0.7740/45, also the highest since April 2018. In a case where the bulls manage to cross 0.7745, April 2018 top near 0.7815 will gain the market’s attention. Overall, AUD/USD remains in an uptrend unless breaking the short-term support line and horizontal area,” explains FXStreet’s Analyst Anil Panchal.

AUD/USD additional levels