AUD/USD hold above 0.7700, remains on track to post modest daily gains

• AUD/USD is clinging to small daily gains during American session.
• US Dollar Index retreats modestly toward 90.30 on Tuesday.
• Wall Street's main indexes trade in the positive territory.

After climbing to 0.7740 during the European trading hours, the AUD/USD pair turned south and tested 0.7700 in the early American session. However, the greenback struggled to preserve its strength in the last hours and AUD/USD edged higher to 0.7730, where it was up 0.45% on a daily basis.

DXY rally loses steam in the second half of the day

The USD's market valuation remains the primary driver of AUD/USD's movements on Tuesday. The US Dollar Index (DXY), which tracks the buck's performance against a basket of six major currencies, advanced to 90.60 but lost its traction after Wall Street's main indexes opened in the positive territory. At the moment, the DXY is down 0.18% on the day at 90.30.

Meanwhile, the 10-year US Treasury bond yield is up nearly 2% at 1.17% on Tuesday, suggesting that the DXY's downside will remain limited if yields continue to push higher. 

Earlier in the day, the data from the US showed that the NFIB Business Optimism Index fell to 95.9 in December and missed analysts' estimate of 102.8. On a positive note, the IBD/TIPP Economic Optimism Index improved to 50.1 in January from 49 in December.

Later in the session, Boston Federal Reserve President Eric Rosengren will be delivering a speech. There won't be any significant macroeconomic data releases featured in the Australian economic docket on Tuesday.

Technical levels to watch for