AUD/USD clings to gains near 0.7565 region, highest level since mid-2018

• A combination of factors assisted AUD/USD to gain traction for the third consecutive session.
• COVID-19 vaccine optimism and rallying iron ore prices provided a strong boost to the aussie.
• The prevalent USD bearish sentiment remained supportive of the recent strong momentum.

The AUD/USD pair now seems to have entered a bullish consolidation phase and was seen oscillating in a range, around the 0.7560-65 region, or fresh two-and-half-year tops.

The pair built on the overnight bullish breakthrough the key 0.7500 psychological mark and continued scaling higher for the third consecutive session on Friday. COVID-19 vaccine-driven optimism, along with hopes for a swift global economic recovery kept the US dollar depressed just above last week’s 31-month trough. This, in turn, helped propel the risk-sensitive currencies, including the Australian dollar.

Against the backdrop of growing investors' confidence, the ongoing rally in Australia’s biggest export commodity – iron ore – provided an additional boost to the aussie. However, overbought conditions on short-term led to some near-term consolidative price action around the AUD/USD pair. Investors also seemed reluctant to place fresh bullish bets amid the lack of consensus on additional US fiscal stimulus measures.

The US lawmakers approved a stopgap government funding bill on Wednesday but have been struggling to hammer out an agreement on the proposed coronavirus relief package. This comes amid growing worries about the economic fallout from the second wave of COVID-19 infections, which was further fueled by Thursday's worse than expected US Initial Jobless Claims and thus, warrants caution before placing fresh bullish bets.

Nevertheless, the AUD/USD pair seems all set for a sixth consecutive weekly rise, gaining around 7% over that time. Market participants now look forward to the US economic docket – featuring the releases of Producer Price Index and revised Michigan Consumer Sentiment Index. The data, along with the US stimulus headlines, might influence the USD price dynamics and produce some short-term trading opportunities.

Technical levels to watch