- The Australian currency is threatening to print fresh 30-month low below 0.7085 on falling Australia-US bond yield differential.
- Optimism over US-Canada trade negotiations, easing US-China trade tensions are not helping the AUD/USD.
The Australian dollar risks printing a fresh 30-month low below 0.7085 as the 10-year bond yield differential continues to slide in the USD-positive manner.
At press time, the 10-year US Treasury note is yielding 37.4 basis points more than its Aussie counterpart, meaning the AU-US yield spread is at the lowest level since 1981. Further, the two-year AU-US bond yield spread has hit a 20-year low.
The drop in the Westpac consumer confidence to -3 percent in September from the previous month’s print of -2.3 percent is not helping the matters ether.
As a result, the Aussie dollar is having a tough time, despite the risk-on action in the US stocks and the easing trade tensions. For instance, China has assured US multinationals they won’t be targeted, according to the Wall Street Journal. Further, the renewed optimism over the US-Canada NAFTA talks and the oil rally also helped stabilize the risk sentiment in the markets, but have failed to put a bid under the Aussie dollar.
Looking forward, the AUD/USD will likely continue tracking the action in the yield differential and Chinese yuan.
AUD/USD Technical Levels
Resistance: 0.7125 (5-day moving average), 0.7144 (Sep. 5 low), 0.7165 (10-day moving average)
Support: 0.7085 (previous day’s low), 0.7066 (pivot S2), 0.47022 (pivot S3)
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