Aussie slips as retail sales slide

The Australian dollar is in negative territory for a second straight day. Currently, the pair is trading at 0.7727, down 0.43% on the day.

Australia Retail Sales fall

Australia’s retail sales started off 2021 on a decidedly sour note, as the January report came in at -1.1%, much worse than the street consensus of +0.6%. The decline is attributable to Covid restrictions, which had a negative impact on consumer spending. The Aussie is also feeling pressure from the geopolitical front, as a tense meeting in Alaska between senior US and Chinese officials is weighing on investors’ risk appetite. Add to this mix higher US Treasury yields, and it’s no surprise that the Australian dollar is headed for a disappointing end to the trading week.

US yields boost the dollar

The Federal Reserve sent the markets a dovish message at its policy meeting on Wednesday, reiterating that it had no plans to raise interest rates before 2023. The US dollar dipped after the Fed meeting, but had little trouble erasing these losses. AUD/USD has posted considerable losses since Thursday’s Fed meeting.

The catalyst for the recent US dollar strength has been rising US yields, and investors were treated to another rise in yields on Thursday. The bond market has been edgy all week, and an outstanding manufacturing reading was enough to cause a strong selloff in US bonds. The Philadelphia Fed Manufacturing Index soared to 51.8 in February, up from 23.1 and its highest level in some 48 years. This signals higher input costs, and US yields took off in response. The US 10-year rose to 1.72%, while the 30-year rose to 2.47%, boosting the US currency.

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AUD/USD Technical

• On the upside, 7832 has some breathing room has AUD continues has lost ground. Above, there is resistance at 0.7880
• 0.7652 is the first line of support. This line could face pressure if the AUD downturn continues. It is followed by support at 0.7546

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

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