AUD/USD clings to gains near two-week tops, just below mid-0.7300s

• AUD/USD regained positive traction on Tuesday and was supported by sustained USD selling.
• Uncertainty over the Fed’s next move, sliding US bond yields continued weighing on the USD.
• A positive risk tone acted as a tailwind for the perceived riskier aussie ahead of US macro data.

The USD selling bias remained unabated through the early European session and pushed the AUD/USD pair to fresh two-week tops, around the 0.7340 region in the last hour.

As investors looked past weak Chinese data, a broad-based US dollar weakness assisted the AUD/USD pair to regain traction on Tuesday and build on its recent bounce from the 0.7100 mark, or YTD lows. The uncertainty over the likely timing of the Fed's tapering plan and fading hopes for an earlier than expected lift-off kept the USD bulls on the defensive.

During the highly anticipated speech at the Jackson Hole Symposium, Fed Chair Jerome Powell confirmed that QE tapering will begin later this year but offered no signal on the specific timeline. Powell also reassured the market that the Fed is in no hurry to raise interest rates and triggered a fresh leg down in the US Treasury bond yields.

In fact, the yield on the benchmark 10-year US government bond fell to 1.27% during the first half of the trading action on Tuesday. This, along with the underlying bullish sentiment in the financial markets, weighed on the safe-haven greenback. This, in turn, benefitted the perceived riskier aussie and provided a goodish lift to the AUD/USD pair.

Bulls might now be looking to build on the momentum beyond a strong horizontal support breakpoint, now turned resistance near the 0.7330 region. Market participants now look forward to the US economic docket, featuring the releases of Chicago PMI and the Conference Board's Consumer Confidence index for some trading opportunities around the AUD/USD pair.

The focus, however, will be on the Australian Q2 GDP report, scheduled during the Asian session on Wednesday. Apart from this, developments surrounding the coronavirus saga, the broader market risk sentiment and the USD price dynamics will play a key role in influencing the AUD/USD pair.

Technical levels to watch