- The AUD/USD is on a free fall as the US dollar is breaking key levels.
- US yields are being prompted up by US fiscal policy and rate hike expectations.
- AUD CPI is scheduled on Tuesday at 1:30 GMT.
The AUD/USD is trading at around 0.7609 down 0.82% on Monday as the US dollar is benefitting by a strong wave of buying.
The US dollar uptrend which started last week is rolling over into Monday’s trading as the bull trend in the US bond yields is taking center stage. The 10-year benchmark has reached 2.99% earlier in the day which are levels not seen since 2014. The boost from the US fiscal policy coupled with expectations of more rate hikes from the Federal Reserve Bank are sending bond yields higher according to Danske Bank’s analysts.
Adding pressure to AUD is the recent pullback in gold and copper prices as the currency is sensitive to changes in prices in the metals.
Looking ahead, the Australian Consumer Price Index (CPI) is going to be released at 1:30 GMT on Tuesday. Investors will be on the lookout for any strong deviation. The CPI is usually an important macroeconomic indicator as central banks use inflation as a gauge of economic activity.
On the USD front, the main macroeconomic data of the week for the US dollar is the Personal Consumption Expenditure (PCE) on Friday which is the favorite gauge of inflation of the Fed. An upside deviation would reinforce rate hike expectations. The US GDP is scheduled on the same day. The first quarter US GDP is expected to increase by 2.3% on a quarterly annualized basis.
Earlier, the US housing data came in above expectation and rose 1.1% over the month in March while the Manufacturing Purchasing Managers Index (PMI) increased to 56.5, the highest level in the last 43 months. On the other hand, the manufacturing activity in Chicago regional area dropped to 0.10 in March, below expectations. However, it is important to note that the tier-two data has been largely overshadowed by the surge in US bond treasury yields.
AUD/USD daily chart
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The trend is bearish. Support is seen at the 0.7600 handle and at 0.7500 swing low. Resistance is seen at 0.7642 swing low and at 0.7815 high.
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