Higher US yields send Aussie sliding

Australian dollar falls below 78 line

What a difference one short day can make in the currency markets. It was just yesterday that the red-hot Australian dollar crossed above the 80-level for the first time since February 2018. The Aussie was once again treating its US counterpart as a punching bag, posting impressive gains of 4.3% in the month of February. The US dollar index has been weakening, and on Thursday the index fell below 90, an important support level in recent weeks. This drop could have signaled that the US dollar was headed even lower.

However, a sharp rise in US bond yields has triggered a dramatic turnaround for the US dollar. The 10-year yield rose as high as 1.61% on Thursday, its highest level since February 2020. The yield has since dropped to 1.47%, but the sharp move has sent the US dollar soaring. AUD/USD has tumbled, losing 1.2% on Thursday and a further  0.96% on Friday, and the pair has dropped int0 77-territory.

Australian indicators continue to show that the economic recovery is gaining traction. On Thursday, Private Capital Expenditure for Q4 rose 3.0%, well above the street consensus of 1.1%. This ended a nasty streak of seven straight losing quarters, dating back to 2019.

AUD/USD Technical

AUD tested resistance at 0.7976 in the Asian session on Thursday, but then reversed directions and has dropped sharply. On Friday, AUD dropped below a strong support level at 0.7870 and this indicates that the AUD upswing has run its course. On the downside, AUD is testing support at 0.7770. Below, there is a support level at 0.7670.

AUD has shown significant swings in recent weeks. This movement is apparent in the downward trend line at the end of January and the more extended upward trend line, which ended on Thursday.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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