Locked in a 20-pip range, falling US yield may power breakout
- AUD/USD in stasis as US stock futures decline.
- Weakness in US yields looks to be restricting downside.
AUD/USD is trading in a 20-pip range of 0.71 to 0.7120 for the ninth straight hour.
The 0.3% decline in the S&P 500 futures look to be capping the upside in the Aussie dollar. Meanwhile, the overnight decline in the US Treasury yields could be restricting losses near 0.71. The 10-year yield fell by six basis points to 1.028% on Monday, weakening the bid tone around the greenback.
Broader outlook bullish
With the Federal Reserve running an open-ended bond purchase program and markets expecting generous fiscal spending under Joe Biden‘s Presidency, the path of least resistance for AUD/USD appears to be on the higher side. The anti-risk dollar typically underperforms in global economic upswings.
The greenback has already taken a beating since the March crash. AUD/USD has rallied from 0.55 to 0.78 in the past ten months.
However, in the short-term, potential rise in the US Treasury yields, the R(BA)‘s aggressive A$100bn QE program (with potential for more), ongoing pain for Australia’s tourism and education exports, and tensions with China could play the spoilsport, according to Westpac analysts.
The US 10-year yield rose from 0.9% to 1.17% earlier this month, putting a bid under the oversold greenback. Yields rose following the Democrats’ recapturing of Senate control.