- AUD/USD remains trapped in 0.6930-6877 trading range.
- The Aussie 10-year yield has hit the highest level in over three months.
- The low odds of a year-end RBA rate cut favor upside break.
The AUD/USD pair remains trap in a narrow range despite the uptick in the Aussie government bond yields.
The pair is currently trading largely unchanged on the day at 0.6896, having hit a low of 0.6886 a few minutes before press time. Notably, the pair has been restricted to a range of 0.6930-0.6877 since Oct. 31.
A range breakout looks likely if we take into account the multi-month highs in the Aussie government bond yields. The 10-year yield is currently trading at 1.254%, the highest level since July 25, representing a 17 basis point gain on the low of 1.08 registered on Nov. 1.
So far, however, the rise in the Aussie government bond yields has failed to put a strong bid under the AUD and so has the easing of US-China trade tensions.
That said, the probability of an upside move still looks strong, courtesy of the falling odds of a year-end rate cut by the Reserve Bank of Australia. The market is currently pricing just 23% chance of a rate cut in December. The central bank kept rates unchanged on Tuesday and sounded less dovish by signaling a pause in rate cut cycle.
Technical levels
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