AUD/USD clings to gains near session tops, above 0.7700 mark

• AUD/USD regained positive traction on Tuesday and snapped two days of the losing streak.
• The underlying bullish sentiment weighed on the safe-haven USD and remained supportive.
• Rallying US bond yields might help limit the USD downside and cap the upside for the major.

The AUD/USD pair edged higher through the Asian session and was last seen hovering near the top end of its daily trading range, just above the 0.7700 mark.

The pair caught some fresh bids on Tuesday and for now, seems to have snapped two consecutive days of the losing streak amid a modest US dollar pullback from near one-month tops. The global risk sentiment remained well supported by hopes for additional US fiscal stimulus measures. This, in turn, was seen as a key factor that undermined the safe-haven USD and benefitted the perceived riskier aussie.

The momentum assisted the AUD/USD pair to recover the previous day's modest losses to two-week lows, through the upside is more likely to remain limited. Expectations of a larger government borrowing triggered a fresh leg up in the US Treasury bond yields. This might help limit any meaningful downside for the greenback and keep a lid on any runaway rally for the major, at least for the time being.

Moreover, investors are likely to turn cautious, rather prefer to wait on the sidelines ahead of the President-elect Joe Biden's inaugural ceremony on Wednesday. This makes it prudent to wait for some strong follow-through buying interest before confirming that the AUD/USD pair has stalled its recent corrective slide from multi-year tops and positioning for any further near-term appreciating move.

There isn't any major market-moving economic data due for release on Tuesday, leaving the AUD/USD pair at the mercy of the broader market risk sentiment. That said, USD Treasury Secretary nominee Janet Yellen’s confirmation hearing – scheduled later today – might play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities around the major.

Technical levels to watch