AUD/USD: Focus is on the 10-year yield differential

  • The Aussie dollar's recovery rally is falling apart as the 10-year yield differential is rising again in the USD-positive manner.
  • The yield differential may revisit recent highs if the Fed policymakers, scheduled to speak this week, call for above-neutral interest rates.

The Aussie dollar is closely following the action in the spread between the US 10-year treasury yield and its Australian counterpart.

The spread topped out at 54 basis points on Oct. 31. Interestingly, the AUD picked up a strong bid on the following day and rose above 0.73 on Nov. 16. During the same time frame, the spread fell back to 35 basis points.

Further, the currency pair dived out of the rising trendline on Nov. 20, signaling the end of the corrective rally, as the spread began to rise again in favor of the USD. Notably, the spread has increased by eight basis points in the last seven days and could rise even further, pushing the AUD/USD lower, if the Fed officials reaffirm the gradual path of tightening and drop hints of an above-neutral interest rate policy.

Fed policymakers - Bostic, Evans, and George - are scheduled to speak today. Fed Chair Powell will take the center stage tomorrow, followed by the Fed minutes on Thursday.

AUD/USD Technical Levels

AUD/USD

Overview:
    Today Last Price: 0.7228
    Today Daily change: -2.0 pips
    Today Daily change %: -0.0277%
    Today Daily Open: 0.723
Trends:
    Previous Daily SMA20: 0.7225
    Previous Daily SMA50: 0.7179
    Previous Daily SMA100: 0.7248
    Previous Daily SMA200: 0.7435
Levels:
    Previous Daily High: 0.7278
    Previous Daily Low: 0.7224
    Previous Weekly High: 0.7327
    Previous Weekly Low: 0.7202
    Previous Monthly High: 0.724
    Previous Monthly Low: 0.702
    Previous Daily Fibonacci 38.2%: 0.7245
    Previous Daily Fibonacci 61.8%: 0.7258
    Previous Daily Pivot Point S1: 0.721
    Previous Daily Pivot Point S2: 0.7191
    Previous Daily Pivot Point S3: 0.7157
    Previous Daily Pivot Point R1: 0.7264
    Previous Daily Pivot Point R2: 0.7298
    Previous Daily Pivot Point R3: 0.7317

 

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