- AUD/USD has been in a parabolic daily rally that could face headwinds.
- US yields are trying to make a comeback and that should support US dollar.
AUD/USD has been an impressive show mid-week, rallying from a low of 0.7465 and reaching a high of 0.7522. It was a US dollar story to start the day with risk sentiment upbeat and as investors focused on rising commodity prices which supported the Aussie. Into the Wall Street close, the bulls are trying and have shied away from the 0.7532 target as the April 1 lows. Instead, the price is levelling out near 0.7520.
The US dollar fell from a one-year high against a basket of other currencies last week with other central banks also sounding the alarm with regards to inflation and a need to act. Both the Reserve Bank of New Zealand and the bank of England are expected to lift off immanently which has stolen the greenback's thunder of late. However, the Federal Reserve is also expected to raise rates sooner than expected to quell rising price pressures, so the Us dollar remains a strong contender for the leader board in the forex space also.
AUD/USD vs US yields
There is also a technical case for a rebound in the 10-year US yield which sank to 1.62% on Wednesday from a high of 1.673%. However, they are now steadied and could be on the verge of another surge to the upside from a technical perspective as the yield spikes from the 21-50 hour SMMA cloud and building demand at counter-trendline support following a break of the hourly flag resistance:
Should the US yields break higher and take the US dollar for a ride to the upside as well. This could prove a major headwind for commodity currencies for the end of the week's sessions.
Meanwhile, the markets are going to be watchful of Reserve Bank of Australia's governor, Phillip Lowe tomorrow who is making a speech, but he is unlikely to reference Australia's monetary policy specifically at the Conference on Central Bank Independence, Mandates and Policies. Next week's RBA’s November statement is the next key AUD risk event for this cross.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD could extend the recovery to 0.6500 and above
The enhanced risk appetite and the weakening of the Greenback enabled AUD/USD to build on the promising start to the week and trade closer to the key barrier at 0.6500 the figure ahead of key inflation figures in Australia.
EUR/USD now refocuses on the 200-day SMA
EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Bitcoin price makes run for previous cycle highs as Morgan Stanley pushes BTC ETF exposure
Bitcoin (BTC) price strength continues to grow, three days after the fourth halving. Optimism continues to abound in the market as Bitcoiners envision a reclamation of previous cycle highs.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Federal Reserve might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.