• AUD/USD gained some follow-through traction on Tuesday and shot to a fresh monthly high.
• The risk-on mood undermined the safe-haven USD and benefitted the perceived riskier aussie.

The AUD/USD pair build on its intraday ascent through the early North American session and shot to the highest level since November 22, around the 0.7265 region in the last hour.

The pair attracted some dip-buying near the 0.7220 area on Tuesday and climbed further beyond the previous monthly swing high, around mid-0.7200s amid a softer tone surrounding the US dollar. The prevalent risk-on mood was seen as a key factor that weighed on the safe-haven greenback and continued benefitting the perceived riskier aussie.

The global risk sentiment remained well supported by reports that the new COVID-19 strain may be less severe than the previous Delta variant. Adding to this, studies that Omicron infections are less likely to lead to hospitalization helped ease fears over the economic impact of the continuous surge in new cases and further boosted investors' sentiment.

That said, the Fed's hawkish outlook, indicating at least three rate hikes next year, should act as a tailwind for the greenback and cap gains for the AUD/USD pair. Investors might also be reluctant to place aggressive bullish bets amid thin year-end trading conditions. This, in turn, warrants some caution before positioning for any further appreciating move.

Nevertheless, the AUD/USD pair remains on track to end the day in the green for the second successive day, also marking the fifth day of a positive move in the previous six sessions. Market participants now look forward to a relatively lighter US economic docket, featuring the release of the Richmond Manufacturing Index. This, along with the broader market risk sentiment, would drive the USD demand and assist traders to grab some short-term opportunities.

Technical levels to watch