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AUD/USD consolidates losses above 0.7200 on RBA’s Kohler, sluggish yields

  • AUD/USD seesaws around seven-week low, snaps two-day downtrend.
  • US President Biden’s Fed nominations propelled yields, DXY before the latest pullback move amid off in Japan.
  • RBA’s Kohler cites all-time low interest rates, Aussie CBA PMIs came in mixed for November.
  • US PMIs, rate hike concerns and China headlines are in focus.

AUD/USD stays mildly bid around 0.7230, snapping the previous two-day declines near the lowest level since early October. In doing so, the Aussie pair benefits from the inactive performance of the US bonds and mixed Australia data amid a lackluster Asian session on Tuesday.

Off in Japan tames the US bond moves and hence the US Treasury yields remain sluggish after the spectacular run-up backed by US President Joe Biden’s decision to nominate Jerome Powell for another term as the Federal Reserve (Fed) Chair and Richard Clarida for Vice-Chairman. That said, the benchmark 10-year Treasury yields rose more than the previous week’s loss in a single day on Monday, clinging to 1.627% by the press time.

While tracking the Treasury yields, the US Dollar Index (DXY) also jumped to the fresh high since July 2020, before recently easing to 96.44.

In addition to the bond yields, the greenback gauge’s latest pullback could also be linked to the comments from Atlanta Federal Reserve President Raphael Bostic, as well as from US Treasury Secretary Janet Yellen. While Fed’s Bostic highlighted faster taper and covid economy, Yellen mentioned during the Bloomberg interview that price pressures subside as life normalizes in 2022.

At home, the Commonwealth Bank of Australia (CBA) released preliminary readings of November’s PMIs. The activity numbers suggest softer Manufacturing PMIs failing to beat the strong Services and Composite PMI figures. Other than the mixed data, comments from Marion Kohler, Head of Domestic Markets at the Reserve Bank of Australia (RBA), also favored the AUD/USD pair’s corrective pullback by citing record low interest rates.

Read: RBA’s Kohler: Will closely monitor risk premiums to judge whether asset prices appear ‘sensibly valued’

Amid these plays, S&P 500 Futures print mild gains and so do Australia’s ASX 200 to keep the AUD/USD buyers hopeful.

Moving on, US PMIs for November becomes more important amid stronger talks of the Fed rate hikes. Should the activity data match upbeat forecasts, the AUD/USD may well break the 0.7200 threshold.

Technical analysis

Although a clear downside break of the three-month-old support line, now resistance around 0.7260, directs AUD/USD prices to the south, a descending support line from November 11 restricts immediate declines around 0.7300 amid oversold RSI conditions.

 

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