AUD/USD: Locked in a 20-pip range, falling US yield may power breakout
- AUD/USD in stasis as US stock futures decline.
- Weakness in US yields looks to be restricting downside.
AUD/USD is trading in a 20-pip range of 0.71 to 0.7120 for the ninth straight hour.
The 0.3% decline in the S&P 500 futures look to be capping the upside in the Aussie dollar. Meanwhile, the overnight decline in the US Treasury yields could be restricting losses near 0.71. The 10-year yield fell by six basis points to 1.028% on Monday, weakening the bid tone around the greenback.
Broader outlook bullish
With the Federal Reserve running an open-ended bond purchase program and markets expecting generous fiscal spending under Joe Biden's Presidency, the path of least resistance for AUD/USD appears to be on the higher side. The anti-risk dollar typically underperforms in global economic upswings.
The greenback has already taken a beating since the March crash. AUD/USD has rallied from 0.55 to 0.78 in the past ten months.
However, in the short-term, potential rise in the US Treasury yields, the RBA's aggressive A$100bn QE program (with potential for more), ongoing pain for Australia's tourism and education exports, and tensions with China could play the spoilsport, according to Westpac analysts.
The US 10-year yield rose from 0.9% to 1.17% earlier this month, putting a bid under the oversold greenback. Yields rose following the Democrats' recapturing of Senate control.
Technical levels
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
