The Australian Dollar managed to recover following the corrective move lower to 0.68822 overnight after the failure to break above the recent high at 0.6988. The Battler’s 24-hour range of 0.6880-0.6990 is intact for now. Risks to a break in that range are the ongoing China-US tussle as well as tonight’s US Payrolls numbers. A turnaround in risk sentiment and a lift in the Greenback will see the Aussie, one of the best performing currencies, experience a sharp downward correction.
Overnight, the yield differential between Australian and US 10-year bond yields narrowed to 19 basis points from 25 basis points yesterday. The Aussie 10-year bond yield rose 1 basis point to 1.01%. US 10-year rates rose 7 basis points to 0.82%. In FX 101, we learned that yield differentials matter.
AUD/USD has immediate resistance at 0.6990-0.7000 followed by 0.7050. Immediate support can be found at 0.6910 followed by 0.6880. A break of 0.6880 could see a corrective move back to 0.6780/0.6800. Meantime expect a pre-US NFP range of 0.6880-0.6980. Prefer to sell rallies.