Australian Dollar Analysis and Talking Points
- Reflation Themes Shift Gear as US Yields Soar
- AUD/USD Dip-Buying Bias to be Tested
- Australian Jobs Data in Focus
Reflation Themes Shift Gear as US Yields Soar
The reflation theme has shifted a gear with yesterday seeing US yields soar to post-pandemic highs, in which US 10yrs briefly hit 1.33% before pulling back slightly. The move in US fixed income has lent support to the USD which has broken back above the trendline from the March 2020 peak. That said, the near term concern for risk appetite is the speed of the move in US yields, where a continuation could provide a headwind for the lofty valuations across equity market, keep in mind that from mid-Feb equities have tended to drift lower. That said, should a equities weaken, the move is unlikely to derail the longer-term trajectory for equities, which remains positive, given that the Fed will not be pulling back from stimulus anytime soon and another fiscal stimulus package is on the horizon.
US Dollar Chart: Daily Time Frame
Source: Refinitiv
AUD/USD Dip-Buying Bias to be Tested
In light of the move in the bond market, the read-across G10 FX has been mixed with the Japanese Yen the clear underperformer, while high beta currencies have performed relatively well, most notably the Australian Dollar. In turn, the dip-buying bias will be put to the test in the Aussie with initial support at 0.77 with 0.7665 below. A supportive factor for the Aussie that will likely reinforce the dip-buying bias has been the strong performance in index heavyweights such as BHP Billiton, who reported strong earnings and record dividends.
AUD/USD vs BHP Billiton
Source: Refinitv
| Change in | Longs | Shorts | OI |
| Daily | 5% | 3% | 5% |
| Weekly | 9% | -30% | -2% |
Australian Jobs Data in Focus
Looking ahead, the focus will be on the Australian jobs data at 00:30GMT, expectations are for 40k jobs to be created with the unemployment rate seen falling 0.1ppt to 6.5%. Reminder, that with the Australian jobs data the quality of jobs is also important to watch, regarding full-time/part-time jobs being created. That said, risks remain tilted to the upside for labour market data. Risk premiums for AUD/USD ATM option straddle, signal an implied move of 40pips.
AUD/USD Chart: Daily Time Frame
Source: Refinitiv
