AUD/USD holds steady near weekly tops, lacks follow-through

The AUD/USD pair held on to its modest gains through the early European session and was last seen hovering near weekly tops, around the 0.7830 region.

The pair edged higher during the early part of the trading action on Wednesday and was supported by a better-than-expected Australian Q4 GDP report. In fact, the economy expanded by 3.1% during the October-December period and the previous quarter's reading was also revised higher to 3.4% from 3.3% estimated previously.

Adding to this, the underlying bullish tone in the equity markets extended some additional support to the perceived riskier aussie. However, a modest US dollar uptick – amid a fresh leg up in the US Treasury bond yields – held bulls from placing aggressive bets and kept a lid on any further gains for the AUD/USD pair.

The US Treasury bond yields have been a key focal point in the financial markets amid the upbeat US economic outlook. The impressive pace of coronavirus vaccinations and the progress on a massive US fiscal spending plan has been fueling expectations for a relatively stronger US economic recovery from the pandemic.

The reflation trade further forced investors to price in a possible uptick in inflation and raised doubts that the Fed would retain ultra-low interest rates for a longer period. This extended some additional support to the greenback and warrants some caution before positioning for any further gains for the AUD/USD pair.

Market participants now look forward to the releases of the ADP report on private-sector employment and ISM Services PMI from the US. This, along with the US bond yields, might influence the USD price dynamics. Apart from this, the broader market risk sentiment might further contribute to produce some trading opportunities around the AUD/USD pair.

Technical levels to watch