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Flattening Treasury yields allow AUD to surge back toward 0.78 US cents

AUD - Australian Dollar

The Australian dollar clawed back losses through trade on Tuesday, climbing through 0.77 US cents amid broader USD selling. With little of note to drive direction through the domestic session, the AUD bounced between 0.7690 and 0.7720 as investors struggled to find a marker for direction, instead sidelining bets ahead of the North American trading day. US Treasury yields have been a key driver through the last week and investors eyed the latest treasury auction for any further widening in yield returns. The auction saw yields unchanged, flattening the recent USD rebound and opening the door for a run back through 0.7750. The AUD lurched higher late in the overnight session touching highs at 0.7773 before steadying at this handle.

The domestic docket is again free from headline data events, so our attentions turn to the broader market narrative for direction. The recent retracement below 0.78 suggests leaving the door open for a period of consolidation between 00.7680 and 0.7820. We will continue to monitor changing yield values a key marker for a possible break outside these ranges.

Key Movers

The US dollar fell sharply through trade on Tuesday, giving up gains across the board as investors shied away from the world’s base currency in search of higher yield returns. A widening in US treasury yields through the last 6 days has been a key driver behind the recent US dollar rebound, however the latest treasury auction saw yield prices unchanged prompting investors to check the recent upturn, drifting back toward other major units. The British pound was the days big winner, surging back through 1.35 and 1.36 to test the January 6 high at 1.3670, while the euro clawed its way back above 1.22 to mark session highs just short of 1.2210. With markets assessing the momentum behind the US dollar, this correction has again pushed it toward multi-year lows and with little of note on the macroeconomic calendar our attentions remain with broader narrative, with an eye to changing yield prices as a possible tipping point for direction.

Expected Ranges

AUD/USD: 0.7680 - 0.7820 ▲

AUD/EUR: 0.6290 - 0.6410 ▲

GBP/AUD: 1.7480 - 1.7720 ▲

AUD/NZD: 1.0690 - 1.0820 ▲

AUD/CAD: 0.9830 - 0.9920 ▲