AUD/USD: eyes on 10-yr T-bill auction for dollar volatility

AUD/USD has moved up to the 21-hr SMA at 0.7418 and pierced it making a high if 0.7434 for the day so far while the Yuan has stabilised making for a positive climate for the proxy trade through the Aussie.  

AUD/USD has otherwise been capped below the 0.7440 and actually was sold off heavily down to 0.7383 in late European trade after the after The Shanghai Composite Index, (SSEC) closed down 1.3 pct which initiated a move to the former 3rd of August resistance level around 0.7410. The continuation came with a build-up of dollar bids until the DXY was capped at the top end of today's range so far between 94.9940-95.4170. 

Watch the 10-year auction for dollar moves

The dollar was capped ahead of today's massive auction of 10-year notes that will be at a record one of $26 billion - the risk there being China is the largest holder of treasuries and investors may not wish to bid in the face of the ongoing trade wars and the risk that China could start to sell off its purchases, ultimately weighing on the value of the newly issued T-notes, especially short-dated ones such as the two-years when rates move higher, (yield and price have an inverse correlation). Such a move could reduce the difference between two- and 10-year Treasuries which is a strong measure of the yield curve - (Shorter-dated Treasury yields rising above longer-dated treasury yields is tracked as a signal for recession) and would ultimately weigh on the dollar. 

AUD/USD levels

Technicals lean bullish with the Aussie now above the 10 & 21-DMAs. However, the 50-D SMA and daily cloud base have so far kept a lid on rallies at 0.7441. The pair needs a close above the 100-D SMA and that is a long way off now and just above the downtrend at 0.7511. On a break of the 50-D SMA and the 100-D SMA,  200-DMA and June high come next. On the flipside, 0.7315/10 and a break the 0.72 handle are exposing the 2001- 2018 uptrend line at 0.7176. The longer-term bear trend is likely to resume solely on the back of the RBA & Fed rate paths in divergence.