AUD/USD – offered at 50-DMA despite widening AU-US yield spread

AUD/USD was offered at 50-DMA level of 0.7608 in earlier today and now trades around 0.7590 even though the 10-yr AU-US yield spread spread widened.

“Higher yields have negative implications for both ends of the risk spectrum, they will tend to weaken extreme low yielders (JPY, EUR, and gold) and also weaken the high yielders, like NZD”, says Greg Gibbs, Director, Amplifying Global FX Capital. AUD too appears to be the victim of the peculiar market behavior.

Moreover, high yielders benefited significantly over the second quarter on ultra low yields across the advanced world. Consequently, the rising yields across the globe is not helped the Aussie.

At the time of writing, the 10-yr yield in Australia was up 7 bps while the one in US was up 3 bps.

AUD/USD Technical Levels

In terms of technical patterns, we see back-to-back Doji candles on the daily chart. Recovery in the bid tone could run into resistance at 0.7608 (50-DMA), above which the spot may target 0.7626 (10-DMA). A violation there would open doors for test of supply around 0.77 handle. On the other hand, breach of support at 0.7580 (previous day’s low) could yield a drop to 0.7553 (Friday’s low) under which sell-off could be extended to 100-DMA level of 0.7526.