Search ForexCrunch
  • AUD/USD is trading in a tight range on Tuesday.
  • US Dollar Index stays flat ahead of American session.
  • 10-year US Treasury bond yield extends rally to fresh multi-month highs.

The AUD/USD pair posted its lowest daily close in a week at 0.7695 on Monday but staged a technical recovery on Tuesday. As of writing, the pair was up 0.42% on a daily basis at 0.7727.

DXY struggles to find direction on Tuesday

The unabated USD strength at the start of the week weighed on AUD/USD. Supported by surging US Treasury bond yields, the US Dollar Index (DXY) touched its highest level in nearly three weeks at 90.72 before going into a consolidation phase on Tuesday.

Although the DXY is staying relatively quiet around the mid-90.00s on Tuesday, the 10-year US T-bond yield extended its rally and was last seen gaining 2% at 1.7%. If T-bond yields preserve the bullish momentum, the DXY could push higher in the second half of the day.

Earlier in the session, the data from the US showed that the NFIB Business Optimism Index slumped to 95.9 in December from 101.4 in November but was largely ignored by market participants. Later in the day, the IBD/TIPP Economic Optimism and JOLTS Job Openings data will be featured in the US economic docket as well.

Meanwhile, Wall Street’s main indexes look to open modestly higher but T-bond yields are likely to remain the primary driver of the USD’s market valuation unless stocks make a sharp move in either direction.

Technical levels to watch for