AUD/USD erase early gains to weekly high

The AUD/USD pair reversed majority of its strong gains to weekly high level near 0.7250 region and has now turned absolutely flat for the day.

Currently trading around 0.7220-25 band, the pair initially jumped to 6-day high in response to a broad based US Dollar sell-off, primarily led by a sharp up-surge in the EUR/USD major. The pair, however, ran through offers as the greenback was seen gaining some traction, helping the broader US Dollar Index to recover some of its early lost ground to 2-week lows. 

Moreover, recovery in the US treasury bond yields was further weighing on higher-yielding currencies - like the Aussie, and contributing to the pair's retracement from higher levels. However, positive sentiment surrounding commodity markets, especially copper, continues to lend support to the Australian Dollar and might limit further downslide. 

Moving ahead, the US Dollar price dynamics would remain a key determinant of the pair's movement on the final trading day of the year. Later during NA session, the Chicago PMI print might provide some impetus for short-term traders.

Technical levels to watch

A follow through retracement below session lows support near 0.7215 level, leading to a subsequent drop below 0.7200 handle, is likely to accelerate the slide towards 0.7185 horizontal support below which the pair is likely to head back towards 7-month lows support near 0.7160 region. On the upside, 0.7245-50 area now seems to have emerged as immediate hurdle, which if cleared should lift the pair towards 0.7300 handle, with 0.7280 level acting as intermediate resistance.