- The AUD is likely tracking the sharp gains in the NZD/USD pair.
- The Aussie-US bond yield differential, however, favors downside in the AUD.
The AUD/USD pair jumped to seven-day highs above 0.7120 earlier today, possibly tracking the sharp gains in the NZD.
The Kiwi dollar jumped 100 pips after the Reserve Bank of New Zealand (RBNZ) kept rates unchanged and pledged to keep rates at that level through 2019 and 2020. Further, the central bank said that the next move in rates could be up or down.
The RBNZ was expected to join the dovish chorus of other central banks, especially, the RBA, which put the rate cuts back on the table last week.
As of writing, AUD/USD is trading at 0.7108, representing a 0.30 percent gain on the day.
The bid tone may weaken if the NZD/USD trims gains. Further, the yield differentials indicate the path of least resistance for the Aussie is to the downside. Notably, the spread between the Aussie and US 10-year government bond yields remains depressed at multi-decade lows near -0.55 basis points.
AUD/USD pivot points
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