AUD/USD climbs to monthly highs above 0.7000 on USD selloff

• AUD/USD is rising for the second straight day on Wednesday.
• Upbeat market mood dampens demand for safe-haven greenback.
• Focus shift to mid-tier data releases from the US.

The AUD/USD pair finished the day modestly higher on Tuesday and preserved its bullish momentum on Wednesday. After rising above 0.7000, the pair extended its climb and touched its highest level in nearly five weeks at 0.7024. As of writing, the pair was up 0.7% on the day at 0.7022.

Risk rally picks up steam

Earlier in the day, the data from Australia showed that the Westpac Consumer Confidence Index in July slumped to -6.1% from 6.3% in June. However, despite the disappointing data, coronavirus vaccine hopes provided a boost to market sentiment and helped the risk-sensitive AUD gather strength against its peers.

Reports suggesting that vaccines developed by Moderna and Oxford showing positive results allowed risk flows to start dominating financial markets. Reflecting the positive market environment, major European equity indexes are up between 1.75% and 2% and S/P 500 futures are gaining 1.3%.

On the other hand, the greenback is having a tough time attracting investors as a safe haven with the US Dollar Index dropping below 96 for the first time in more than a month. In the second half of the day, Industrial Production, Capacity Utilization and Federal Reserve Bank of New York's Empire State Manufacturing Survey will be looked upon for fresh catalysts.

Meanwhile, market participants will keep a close eye on Wall Street and a decisive rally in US stocks could force the USD to continue to weaken.

Technical levels to watch for