Aussie slides despite sharp retail sales

The Australian dollar has started the new trading week with sharp losses. AUD/USD is currently trading at 0.7685, down 0.91% on the day. The Aussie finds itself in the unusual position of being on a mini-slide, as the US dollar is finally showing some signs of life.

US yields boost dollar

Solid Australian data on Monday could not stem the Aussie’s slide against the US dollar. On the inflation front, the Melbourne Institute Inflation Gauge rose 0.5% in December, up from 0.3 per cent. The reading marked a 5-month high, pointing to stronger economic activity. Retail sales jumped 7.1% in November, an almost identical gain to the previous release of 7.0%. This strong reading edged above the forecast of 7.0%.

It is noteworthy that the Australian dollar is sharply lower on Monday, despite an excellent Aussie retail sales release that exceeded the street consensus. Investors have given the US dollar a thumbs-up, as the currency has recorded broad gains.

The newfound positive sentiment is largely a result of higher US Treasury yields, which has caused a US dollar short squeeze and propelled the currency to higher levels. The US dollar index is on the move and has risen to 90.51, for a gain of 0.51% on the day. The dollar index is putting pressure on a major resistance line at 91.00; a daily close above that line would likely extend the dollar short squeeze. With investors focused on US yields, tier-1 events are not having their usual impact on the currency markets. This can be seen with Australian Retail Sales, as well as the dreadful US nonfarm payrolls report on Friday, which came in at -140,000. Despite this soft reading, the Australian dollar failed to make any inroads against its US counterpart on Friday.

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AUD/USD Technical

• AUD/USD is putting downward pressure on support at 0.7665. Below, there is support at 0.7566
• The pair faces resistance at 0.7842, followed by resistance at 0.7920
• AUD/USD crossed below the 10-day MA in the Asian session. This is a sign of a downward trend for the pair

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