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  • AUD/USD remains below 0.74, having closed a one-year low of 0.7347 yesterday on trade fears.
  • AUD/USD risk reversals hit a four-month low, signaling rising demand for the AUD puts.

The corrective rally in AUD/USD from 0.7347 (one-year lows) seems to have run out of steam at 0.7395 in Asia.

As of writing, the spot is trading at 0.7380 and could drop to 0.7327 – 61.8 percent Fibonacci retracement of 2016 low – 2018 high as the 10-year Aussie government bond yield is now yielding 25 basis points less than its US counterpart and the differential could rise further in the AUD-negative manner amid further monetary policy divergence.

Also, the AUD/JPY cross is on the defensive amid rising trade tensions and that could add to bearish around the Aussie dollar. Further, Westpac Leading Index fell 0.2 percent month-on-month in May compared to a 0.2 percent rise seen in April.

Meanwhile, the one-month 25 delta risk reversals fell to -0.95 today – the lowest level since Feb. 20, signaling rising demand or implied volatility premium for the AUD put options (bearish bets).

AUD/USD Technical Levels

Resistance: 0.7421 (5-day moving average), 0.7476 (May 30 low), 0.7508 (10-day moving average).

Support: 0.7347 (previous day’s low), 0.7327 (61.8% Fib), 0.73 (psychological support).