The AUD/USD pair attracted some dip-buying near the 0.7120 region on Wednesday and turned positive for the second successive day. The intraday move up pushed spot prices to a fresh weekly high, around the 0.7170-75 region, heading into the North American session.
Investors turned optimistic amid reports that the Omicron is less severe than all previous variants of COVID-19 and the current vaccines may be more effective than first thought in fighting the new strain. This was evident from a generally positive risk tone, which, in turn, benefitted the perceived riskier aussie.
On the other hand, retreating US Treasury bond yields undermined the US dollar. This was seen as another factor that contributed to the AUD/USD pair's goodish intraday bounce of over 50 pips. That said, the Fed's hawkish outlook should limit the USD downside and keep a lid on any further gains for the major.
From a technical perspective, any subsequent move up is likely to confront some resistance near the 0.7185 region. This is closely followed by the 0.7200 round-figure mark and the monthly swing high, around the 0.7220-25 region, which if cleared decisively would be seen as a fresh trigger for bullish traders.
Meanwhile, technical indicators on the daily chart – though have recovered from the negative territory – are yet to confirm the bullish bias. This makes it prudent to wait for a strong follow-through buying before positioning for any further gains amid thin liquidity heading into the year-end holiday season.
On the flip side, immediate support is pegged near mid-0.7100s, below which the AUD/USD pair could drop back to retest the daily swing low, around the 0.7120 region. Some follow-through selling, leading to a subsequent break below the 0.7100 mark, could prompt technical selling and turn the pair vulnerable.
That said, bearish traders would still wait for sustained weakness below the 0.7090-80 region. The AUD/USD pair might then accelerate the fall to intermediate support near the 0.7060 region before dropping to challenge the YTD low, around the key 0.7000 psychological mark touched earlier this December.
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