AUD/USD stays on the way to 0.7170 despite fresh challenges to sentiment

• AUD/USD grinds higher at weekly top following two-day uptrend.
• Yields retreat, US stock futures stay mildly bid on mixed concerns.
• US-Russia, Sino-American stories battle receding fears from Omicron.
• Light calendar, market’s wait for Friday’s US CPI highlights risk catalysts for fresh impulse.

AUD/USD eases to 0.7120, following an uptick to refresh weekly top during the early Asian session on Wednesday.

While fresh challenges to the market’s previous risk-on mood could be cited as testing the bulls, the Aussie pair’s technical breakout of the key hurdle keeps buyers hopeful amid a likely quiet session with no major data/events.

The US warns Russia of sanctions and helps Ukraine with military power if Kremlin invades Kyiv. “The Biden administration is in ‘intensive consultations’ with the new German government over its response if Russia invades Ukraine and believes Germany would be ready to take significant action if Russia launches an attack, a senior U.S. State Department official said on Tuesday,” said Reuters.

Elsewhere, the US boycott of the 2022 Beijing Olympics doesn’t bode well with China as the dragon nation warns Washington of consequences due to the same. Additionally, the market’s optimism also fades amid concerns over China’s struggling real-estate firms like Evergrande and Kaisa.

On the contrary, receding fears of the South African coronavirus variant, dubbed as Omicron, as well as hopes of more stimulus from China, keeps AUD/USD buyers hopeful.

Against this backdrop, the US 10-year Treasury yields snap two-day uptrend around 1.47%, down two basis points (bp), whereas S&P 500 Futures struggle to follow its Wall Street benchmark that rallied the most since March.

Moving on, a lack of major data/events will keep risk catalysts on the driver’s seat. That said, the latest risk-off factors may trigger consolidation of the AUD/USD gains due to the pair’s risk barometer status.

Technical analysis

AUD/USD pierced the key hurdle to the north around 0.7110, comprising 10-DMA and the upper line of a five-week-old descending channel.

That said, the receding bearish bias of MACD signals and RSI rebound from oversold area back the pair’s recovery moves from a horizontal area including lows marked during November 2020 and so far during December 2021, near 0.6990.

Hence, the AUD/USD bulls are set to battle the 0.7170 resistance that encompasses September lows and last week’s tops.