- The AUD is under pressure in Asia, courtesy of falling bond yields and weakness in the Chinese yuan. The offshore yuan (CNH) has hit the lowest level since Feb. 19.
- The US recession fears seem to have triggered a flight to safety. The S&P 500 futures are currently reporting losses.
AUD/USD is currently trading at session lows near 0.7075, having hit a high of 0.7096.
The US 10-year treasury yield fell to a 15-month low of 2.35 percent a few minutes ago but has failed to put a bid under the Aussie dollar, possibly because the Australian government bond yields are setting new lows. For instance, the three-year yield fell to a record low of 1.354 percent soon before press time.
Possibly adding to the offered tone around the Aussie dollar (a G-7 proxy for China) are the losses in the Chinese yuan. The USD/CNH pair, which represents yuan’s offshore exchange rate, is currently trading at 6.7497 – the highest level since Feb. 19.
Looking forward, the currency pair could extend losses as the futures on the S&P 500 index are signaling risk aversion with a 0.45 percent drop.
It is worth noting that the Fed has paused rate hikes for 2019, while the RBA is expected to cut rates at least by 25 basis points this year. Further, the Fed’s plot released last week showed the central bank could hike rates next year. Put simply, the central bank divergence remains biased toward the USD bulls.
Technical Levels
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