AUD/USD: Pressured below 0.7800 on strong Treasury yields, focus on Aussie Retail Sales

• AUD/USD stays depressed after slipping from monthly top to print the heaviest fall in two weeks.
• Sino-American tension, reflation fears weigh on risks despite vaccine optimism, upbeat data from Australia, US also ignored.
• Aussie Retail Sales, updates from US-China virtual meeting eyed.

AUD/USD holds lower ground near 0.7760, after portraying the strong decline from the monthly high the previous day, during the initial early Friday morning in Asia. The aussie pair initially jumped to the highest in three weeks on Thursday while cheering the post-Fed US dollar drop. However, the gains were latest reversed with heavy losses as the US Treasury yields remained firm, keeping reflation fears on the table, as well as amid US-China tussles ahead of the first talks among the world’s top-two economies since Joe Biden took the White House.

US-China, Aussie Retail Sales eyed but bond yields are the key…

Although the Fed tried to tame bond bears, strong US Philadelphia Fed Index prints backed the discomfort among policymakers suggesting no rate-hike until 2024 to propel the US 10-year Treasury yields to the highest since January 2020. It’s worth mentioning that the increased numbers of Fed members backing an early rate increase, despite consensus on no action till 2024, seem to have played its role amid upbeat US fundamentals.

Elsewhere, the tension surrounding the US-China talks also weighs on the AUD/USD prices. The reason is that the just started discussions are the first between Washington and Beijing since Joe Biden took office. In the latest update, White House National Security Adviser Jake Sullivan and US Secretary of State Antony Blinken both sounded tough on China ahead of the talks began.

It’s worth mentioning that the strong Aussie employment data couldn’t save AUD/USD as the US activity and jobs figures came in positive. Also on the positive side, the bet was ignored, was the chatter around covid vaccine as the European Medicine Authority (EMA) said AstraZeneca is safe to use following multiple claims of blood clotting and rejection to use by the bloc countries. On the same line, the UK’s Medicine Regulator and the World Health Organization (WHO) were also positive in their earlier announcements while the WHO is up for official comments on Friday. Furthermore, US President Biden cheered the ability to meet the goal of 100 million covid shots by Friday.

Amid these catalysts, the US 10-year Treasury yields end Thursday with 6.5 basis points (bps) of gains to 1.706% whereas Wall Street benchmarks dropped heavily by the press time.

Moving on, Australia’s preliminary Retail Sales for February, expected 0.4% MoM versus 0.5% prior, will decorate the calendar and entertain traders along with the Sino-American updates. However, the US bond moves are the key to watch.

Technical analysis

Despite stellar moves to the south, AUD/USD stays above 50-day SMA and a short-term rising support line, respectively around 0.7740 and 0.7710, which in turn keeps buyers hopeful to again cross the 0.7800 threshold.