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  • A positive risk tone benefitted the perceived riskier aussie and assisted AUD/USD to gain traction.
  • Sustained USD buying kept a lid on any further gains, rather prompted some selling at higher levels.
  • The upbeat US economic outlook, rising US bond yields continued underpinning the greenback.

The AUD/USD pair surrendered a major part of its intraday gains to one-week tops and was last seen trading near the lower end of its daily trading range, around the 0.7635 region.

Following the previous day’s two-way/directionless trading moves, the pair managed to gain some positive traction on Tuesday and built on its recent bounce from the vicinity of YTD tops. A generally positive risk tone was seen as a key factor that extended some support to the perceived riskier aussie. However, sustained US dollar buying kept a lid on any further upside, rather prompted some fresh selling at higher levels.

The USD shot to four-and-half-month tops and remained well supported by the upbeat outlook for the US economy. Investors remained optimistic about the prospects for a relatively faster US economic recovery from the pandemic, bolstered by the impressive pace of coronavirus vaccinations, the passage of a massive stimulus package and expectations for an additional $3.0 trillion infrastructure spending plan from the Biden Administration.

Apart from this, a fresh leg up in the US Treasury bond yields provided an additional boost to the greenback. In fact, the yield on the benchmark 10-year US government bond jumped back closer to the 1.75% threshold, or over one-year tops touched earlier this month. This was seen as another factor that collaborated towards capping gains for the AUD/USD pair, possibly setting the stage for the resumption of the prior depreciating move.

Market participants now look forward to the US economic docket, highlighting the release of the Conference Board’s Consumer Confidence Index. This, along with the US bond yields, will influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the AUD/USD pair.

Technical levels to watch