AUD/USD edged up on higher oil, China optimism and an uptick in bond yields´ differential
- AUD is boosted by China and commodity optimism.
- AUD is boosted by upbeat AU wage growth data last week.
AUD/USD is now trading around 0.7848, in New York session, edging up by 0.15% on higher oil, China´s optimism, and an uptick in bond yields´ differential with USD. On the weekend, there was a report that China will change its constitution to allow the current President Xi for the 3rd term or further if such situation arises.
China´s President, Xi is being seen as the modern architect of China and the country is the largest trading partner of Australia, the major consumer of this latest production pf basic commodity raw materials like iron ore. Apart from China´s optimism, higher oil is also good for AU stock market and the AUD, which is heavy on energy companies.
Also after last few days fall of US bond yields, the differential between AUDUSD is again on the uptick after the recent negative divergence. This is also supporting the AUD/USD pair to some extent on the renewed appeal of a high beta carry trade commodity currency. As a reference, AU 10Y bond yield is now around 2.76% against US’s 2.86% and US bond yield is now under more stress than its AU counterpart.
On Friday, both US bond yields and the USD came under pressure on the reduced worries of inflation after US treasury secretary Mnuchin downplayed the concerns about rising US inflationary pressure despite wages´ growth.
The USD got some boost on some optimistic comments by Fed’s Bullard, a well-known dove. Bullard said that the US economy is looking very good and he is not concerned by stress levels following market´s sell-off. The promise of tax reform may boost up private investment. But he is little concerned that Fed may hike too fast although he is now more optimistic about US inflation prospects as a rise in 10-year bond yield is partially driven by a rise in inflation expectations among investors.
The comments about US inflation expectations by Bullard may have boosted the USD as it was not expected from a super dove like him.
On the US economic data front, new home sales figure for January came subdued, negative for the USD to some extent. But Dallas Fed Mfg Business Index for February came as a blockbuster and may have also helped the USD.
Technically, AUDUSD has now an immediate support at around 0.7820 and sustaining below that it could further fall to the 0.7755 price zone. On the upside, AUDUSD needs to sustain above 0.7850 for a further rally toward the 0.7995-0.8055/0.8136 price area in the days ahead.