AUD/USD inter-markets: Eyes 0.7600 on narrowing Aus – US 10-yr yield spread

The Aussie is trading in a narrow range on 0.76 handle since Wednesday, despite RBA’s optimistic stance on the economy and AUD level.

Even today, AUD/USD stalled its upside near 0.7660 level, as the bulls failed to capitalize on solid Chinese trade report-led bullish momentum, while a 5% rally in the Dalian iron-ore futures this Friday, also left the Aussie unimpressed. The iron-ore futures on the Chinese exchange hit the highest levels since Dec 2013.

The main reason behind the underperformance seen behind the spot can be attributed to the narrowing yields differential between the Australian 10-year government bond yields and US 10-year treasury yields, which continue to tilt in favor of the USD. The treasury yields continue to garner strength from Trump reflation trades, while the Aussie 10-year yields touched its lowest levels since November a day before.

In terms of technicals, at 0.7642, the immediate support located at 0.7601 (20-DMA). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7526 (200-DMA) and below that 0.7500 (zero figure). On the flip side, the pair finds the next resistance at 0.7667 (previous high) above which gains could be extended to the next hurdle located 0.7699 (multi-week high) and 0.7750 (psychological levels).