- AUD/USD struggles to trim the first losses in four days.
- Downbeat RBA minutes couldn’t call the sellers but USD strength did snap three-day uptrend near five-week high.
- US traders’ return from extended weekend propelled greenback, US Treasury yields amid vaccine, stimulus hopes.
- Aussie Westpac Leading Index, RBA’s Kent can offer immediate direction but nothing major than the US aid package updates.
AUD/USD wavers around 0.7760, following the previous day’s drop o 0.7743, at the start of Wednesday’s Asian trading session. Having initially jumped to the highest in over a month, the aussie pair defied the short-term upward trajectory. The following recovery moves, however, seem to fade off-late.
US Treasury yields propelled USD…
Although improving odds of the US covid relief package and upbeat vaccinations join the receding virus infection to portray a common investment theme it’s the US Treasury yields that lured the traders back to the US dollar.
Having returned from Monday’s holiday, US policymakers are ready to roll out President Joe Biden’s $1.9 trillion stimulus by early March as ex-President Donald Trump is acquitted for the Capitol Hill attacks. Elsewhere, Israel and the UK mark the vaccine optimism and the resulted drop in virus infections. However, the covid strains are still a worry to watch. Furthermore, vaccinations are on the jump with the Asia-Pacific leaders preparing for mass-jabbing.
Against this backdrop, the US 10-year Treasury yields jumped to 1.30%, the highest since February 2020, whereas US equity benchmarks closed mixed after refreshing the record top. Further, billions step back as the US dollar index (DXY) marked the strongest gains in two weeks after declining to a month’s low.
As the market’s upbeat sentiment changes direction from equities to Treasuries, coupled with the recent US dollar gains, any negative surprises will have a higher impact on the AUD/USD momentum and hence risk catalysts require major attention. It should, however, be noted that the current risk-on mood keeps the bulls in the driver’s seat.
Further, Australia’s January Westpac Leading Index, prior 0.12%, as well as comments from RBA Assistant Governor (Financial Markets) Christopher Kent, during a panel discussion at the Finance & Treasury Association’s FX roundtable webinar, will also be the key to watch.
Technical analysis
Unless breaking the 0.7700 threshold, comprising 21-day SMA and the January-end tops, AUD/USD remains well-placed to challenge the yearly top of 0.7820. during the move, the 0.7806 hurdle should be observed closely.
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