AUDUSD seesaws near 0.6670 support as firmer Treasury yields underpin US Dollar rebound

  • November 17, 2022
  • AUDUSD braces for the first weekly loss in five, remains sidelined of late.
  • Hawkish Fedspeak, risk aversion propelled US Treasury yields and US Dollar.
  • Headlines surrounding China, Russia exert additional downside pressure on the Aussie pair.
  • Mixed US data, firmer Australia jobs report failed to impress buyers.

AUDUSD treads water around 0.6690 after a two-day downtrend as bears seek more clues to snap a four-week uptrend. That said, a light calendar on Friday also challenges the Aussie pair sellers during the Asian session. Even so, the US Dollar’s rebound, backed by the firmer Treasury yields, joins the market’s sour sentiment to keep the pair sellers hopeful.

US Dollar Index (DXY) eyes a recovery from the three-month low marked earlier in the week on recently hawkish comments from the US Federal Reserve (Fed) officials, as well as firmer top-tier data from the United States. In doing so, the greenback ignores Thursday’s mixed figures of the second-tier statistics.

Strong prints of the US Retail Sales and Producer Price Index (PPI) for October seemed to favor the Fed hawks. That said, St. Louis Federal Reserve President James Bullard said on Thursday that the US Federal Reserve’s (Fed) monetary policy is not yet in a range estimated to be sufficiently restrictive to reduce inflation. On the same line were the latest comments from Minneapolis Federal Reserve Bank President Neel Kashkari. “With inflation still high but a lot of monetary policy tightening already in the pipeline, it’s unclear how high the US central bank will need to raise its policy rate,” said Fed’s Kashkari.

Talking about the data, US Philadelphia Fed Manufacturing Index fell to -19.4 versus -6.2 market forecasts and -8.7 prior. Further, Housing Starts declined by 4.2% MoM in October following September’s 1.3% contraction whereas Building Permits fell by 2.4%, compared to a 1.4% increase recorded in the previous month. Additionally, the Jobless Claims eased to 222K for the week ended on November 11 versus 225K expected and upwardly revised 226K prior.

At home, Australia’s Employment Change jumped by 32.2K versus 15K market forecasts and 0.9K prior whereas the Unemployment Rate dropped to 3.4% from 3.5% previous readings and 3.6% expected. The employment statistics gained an additional edge to lure buyers, especially after the strong Wage Price Index was published. However, the previously dovish statements from the Reserve Bank of Australia (RBA) officials seemed to have kept the AUDUSD buyers on the board.

Elsewhere, fresh tension between Russia and Ukraine due to missile strikes on Poland, as well as the increasing Covid counts in China also weighed on the market’s sentiment and the risk-barometer pair.

While portraying the mood, Wall Street closed in the red while the US 10-year Treasury yields bounced off a six-week low.

Moving on, a lack of major data/events could allow bears to take a breather but the risk-off mood and hawkish Fed concerns may push the AUDUSD price toward the weekly loss.

Technical analysis

As the retreat in the RSI (14) backing the Aussie pair’s U-turn from the 61.8% Fibonacci retracement level of the August-October downside, around 0.6770, the odds of the quote’s downside break of the 100-day EMA support, near 0.6670 at the latest, are too high.