AUD/USD: Bulls eye fresh monthly top near 0.7250 on upbeat sentiment

• AUD/USD reversed Friday’s pullback to paint positive week-start, grinds higher around monthly peak.
• A jump in the covid cases, off in Aussie markets fail to tame the risk-on mood.
• Receding fears from Omicron, headlines from PBOC and US CDC favored bulls amid light calendar.
• Markets are off in Australia and hence risk catalysts can entertain traders ahead of the US session.

AUD/USD portrays the market’s risk-on mood while staying firmer around the monthly top, taking rounds to 0.7240 during early Tuesday morning in Asia.

While easing fears of the South African covid variant and stimulus hopes favored the bulls, holidays at home and a light calendar elsewhere restrict the Aussie pair’s performance of late.

With multiple studies from South Africa and the UK showing fewer odds of hospitalization due to the Omicron covid variant, global policymakers and traders took a sigh of relief from the fears emanating from the virus strain even as the cases rally in the West. The same helped the US Centers for Disease Control and Prevention (CDC) to follow the UK while reducing the isolation and quarantine period for the general population from the previous 10 to five.

Also on the positive side were comments from US Vice President Kamala Harris who signaled to use her tie-breaking vote to pass President Joe Biden’s Build Back Better (BBB) stimulus plan. On the same line were headlines from the People’s Bank of China (PBOC) and the Chinese Finance Ministry that favored further easy money to help sustain the economic growth of Australia’s largest customer.

Furthermore, ongoing talks over Iran’s denuclearization and a global push for peace between Russia and Ukraine also seem to have offered relief to the markets.

It should be noted that a downbeat print of the US Dallas Fed Manufacturing Index for December, 8.1 versus 13.2 expected and 11.8% added to the AUD/USD strength, via softer USD.

Alternatively, the virus infection continues to swirl at a faster pace with the UK and France hitting badly while a surge in the daily cases could be witnessed in Australia as well. “New South Wales (NSW) has recorded 6,062 COVID-19 cases and one death in the 24 hours to 8 pm yesterday. Hospitalizations have risen to 557, up from 521 in the previous reporting period,” said ABC News.

Amid these plays, US equities closed higher while the US 10-year Treasury yields eased from the two-week high, dropping 1.7 basis points (bps) to 1.47%.

Moving on, the holiday mood in Australia and an absence of major catalysts keep Omicron headlines on the driver’s seat before the US housing and Richmond Fed Manufacturing data could entertain the traders.

Technical analysis

Unless staying beyond September’s low surrounding 0.7170, AUD/USD remains capable of refreshing the monthly peak of 0.7253. However, the 50-DMA and 100-DMA hurdles, near 0.7280 and 0.7300 in that order, will challenge the bulls afterward.