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  • A subdued USD demand assisted AUD/USD to regain some positive traction on Tuesday.
  • Rallying US bond yields should help limit the USD downside and cap gains for the major.

The AUD/USD pair built on its steady intraday positive move and refreshed daily tops, around the 0.7725-30 region during the early European session.

The pair managed to regain some positive traction and recovered a part of the previous day’s losses to near one-week lows, around the 0.7660-55 region. The AUD/USD pair, for now, seems to have stalled its recent corrective slide from multi-year tops and was being supported by a subdued US dollar demand through the first half of the trading action on Tuesday.

Apart from this, the underlying bullish sentiment around the global financial markets – amid hopes for additional US stimulus – provided an additional boost to the perceived riskier aussie. Investors have been pricing in the prospects for more aggressive fiscal spending in 2021 following the Democratic sweep in the US Senate runoff elections in the stage of Georgia.

Meanwhile, expectations of a larger government borrowing continued pushing the US Treasury bond yields higher. This, in turn, should help limit any meaningful downside for the greenback and cap the upside for the AUD/USD pair. This makes it prudent to wait for some follow-through buying before traders start positioning for the resumption of the pair’s recent uptrend.

There isn’t any major market-moving economic data due for release from the US on Tuesday. Hence, the broader market risk sentiment and the US bond yields will continue to play a dominant role in influencing the USD price dynamics. This, along with developments surrounding the coronavirus saga, should assist traders to grab some short-term opportunities.

Technical levels to watch