AUD/USD holds steady near mid-0.7100s, lacks follow-through
- AUD/USD staged a goodish rebound from the 0.7100 neighbourhood, or over a three-month low.
- The risk-on impulse turned out to be a key factor that benefitted the perceived riskier aussie.
- A strong pickup in the US bond yields revived the USD demand and capped gains for the major.
The AUD/USD pair held on to its modest intraday gains heading into the North American session, albeit seemed struggling to capitalize on the move beyond mid-0.7100s.
The pair attracted some buying in the vicinity of the 0.7100 mark on Monday and recovered a major part of the previous session's losses to over a three-month low. Investors considered that Friday's market reaction to the discovery of the omicron coronavirus variant was overdone. This, in turn, led to a positive turnaround in the global risk sentiment, which was seen as a key factor that benefitted the perceived riskier aussie.
Meanwhile, the risk-on impulse in the markets led to a sharp recovery in the US Treasury bond yields, which helped revive the US dollar demand and kept a lid on any further gains for the AUD/USD pair. That said, fresh COVID-19 jitters might have forced investors to reassess the Fed's (hawkish) policy outlook. This could hold back traders from placing aggressive bullish bets around the USD and continue lending some support to the major.
Nevertheless, the AUD/USD pair, so far, has managed to defend the 0.7100 mark, or the YTD low touched in August, which should act as a key pivotal point for short-term traders. Monday's US economic docket features the release of Pending Home Sales data, though is unlikely to provide any meaningful impetus. The market focus will remain glued to developments surrounding the coronavirus saga, which will play a key role in influencing the risk sentiment.
Apart from this, the US bond yields will influence the USD price dynamics and produce some trading opportunities around the AUD/USD pair. Traders will further take cues from Fed Chair Jerome Powell's speech later this Monday, which will be followed by the official Chinese PMI prints for November during the early Asian session on Tuesday.
Technical levels to watch