AUD/USD stays pressured towards 0.7200 after refreshing five-week high on mixed clues

• AUD/USD holds lower ground following its U-turn from the highest levels since November 22.
• Mixed data from US, chatters surrounding Omicron triggered consolidation of recent gains amid thin end-of-year liquidity conditions.
• Australia, New Zealand begins trading week with no major data/events to track, second-tier US figures may entertain.
• Risk catalysts are crucial for short-term direction, an inactive day near the monthly top can’t be ruled out.

AUD/USD defends 0.7200 threshold despite reversing gains from a five-week top the previous day. That said, the quote seesaws around 0.7225-30 as Australia begins the holiday-shortened trading week on Wednesday.

In doing so, the Aussie pair tracks equities and gold prices amid generally lacklustre year-end trading sessions, with major attention on the South African covid variant, namely Omicron, as well as on the chatters surrounding the Fed’s rate hike concerns.

Wall Street benchmarks traded volatile as DJI managed to print a five-day uptrend but S&P 500 snapped a four-day winning streak even after refreshing the record top during early hours. Nasdaq also closed negative for the first time in five days after poking the all-time high levels marked in November. Moving on, Gold (XAU/USD) crossed the $1,814 hurdle to refresh the monthly top but posted the heaviest daily losses in a week.

Australia’s most populous state New South Wales (NSW) reports doubling of the covid infections for Tuesday, with 11,201 new infections and three virus-led deaths. Victoria also was in the line as ABC News stated, “Victoria has recorded 3,767 new local COVID-19 cases and five deaths, as testing centres continue to be overwhelmed early in the day.” This pushes the Pacific major to report the biggest daily jump in COVID-19 cases.

On the other hand, “The average number of new COVID-19 cases in the United States has risen 55% to over 205,000 per day over the last seven days,” according to a Reuters tally.

Elsewhere, US Housing Price Index eased below 1.2% forecast to 1.1% in October while S&P/Case-Shiller Home Price Indices stepped back from 19.5% prior to 18.4%, versus 18.5% market consensus. However, the Richmond Fed Manufacturing Index for December crossed the upwardly revised 12.00 figure with 16.00%.

Irrespective of the mixed data, the US inflation expectations remain near the monthly high, per 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis, which in turn keeps the hope of early rate hike from Fed on the table and weigh on AUD/USD prices.

That said, the US Treasury yields had a volatile day as a coupon for the two-year benchmark jumped to the highest since March 2020 but the 10-year Treasury yields remained lacklustre around 1.48%.

Looking forward, a light calendar and year-end holiday mood may restrict AUD/USD moves while virus updates and Fed speculations will offer intermediate directions. On the data side, US Pending Home Sales and Goods Trade Balance for November are the keys to watch.

Technical analysis

Despite the recent pullback, AUD/USD prices stay above the mid-December tops surrounding 0.7225, as well as 38.2% Fibonacci retracement (Fibo.) of October-December declines near 0.7205, which in turn keeps buyers hopeful.

However, 50-DMA and 100-DMA, respectively near 0.7270 and 0.7290, challenge short-term advances of the pair ahead of flashing the 0.7300 threshold on the chart.