- AUD / USD has fallen back to 0.7700 from session highs above 0.7800 amid strong USD conditions.
- Concerns that China consider restrictions on the export of rare earths to the US may also have affected the Australian dollar.
The AUD/USD It has been on the defensive since the arrival of US market participants at 11:00 GMT after its long weekend. The pair had managed to break above the 0.7800 level twice during the Asia Pacific and Europe morning sessions, its highest levels since mid-January, but is now trading just above 0.7250. Currently, the AUD is trading around 0.3% lower on the day against the US Dollar.
The AUD / USD slide is being driven mainly by flows to the USD on Tuesday. The dollar got a boost with the release of a much stronger-than-forecast NY Empire State Manufacturing Index survey (the main number jumped to 12.1 in February versus expectations for a much more modest rise to 6.0 from 3.5 in January) . The dollar index received a notable boost from the data, helping to launch it back above 90.50.
The strong survey bodes well for the Philadelphia Fed Manufacturing Survey and Markit PMI report to be released on Thursday and Friday, respectively, this week. With Covid-19 infection rates in the US falling sharply and precipitating a new reopening, the impact of the January stimulus beginning to be felt and expectations of further fiscal stimulus in the future, US economic data. The US will improve in the coming months.
Also, there is a lot of focus on the surge in US bond yields on Tuesday and this is also giving the USD a boost.
All three major US indices opened at record highs. However, rising US bond yields increase the relative attractiveness of investing in the bond market versus the stock market, and the extent of Tuesday’s rally in yields appears to be weighing on the stock market. Given the positive correlation of the AUD with stocks, this is another reason why the AUD should be lower on the day.
Technical Levels
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