AUD/USD fell below the 21-DMA and struck a 12-session low Friday on the back of U.S. yield (US2YT=RR) gains rallying the U.S. dollar and the risks of a deeper aussie fall are building ahead of key U.S. data next week.
The U.S. yield gains helped increased the U.S. dollar’s yield advantage over the aussie as Australia-U.S. 2-year spreads hit their widest in nearly two weeks.
Should spreads widen further the existing correlation between them and AUD/USD could help extend the pair’s recent drop.
Technicals are beginning to highlight downside risks as well.
AUD/USD trades below the 10- and 21-DMAs, daily RSI implies downward momentum is in place for the short-term and a monthly doji candle is now in place for July.
CFTC data for net-AUD positions is near neutral to suggest some lack of conviction from investors, which could mean U.S. weekly claims and June PCE may significantly impact AUD/USD.
A drop in claims and an above estimate PCE may see investors lean towards the Fed maintaining its restrictive policy stance.
Rates, yields and the U.S. dollar would likely rally which could send AUD/USD sharply lower.
AUD/USD’s up trend off April’s low may end and a test of the 0.6450/0.6500 area may ensue.
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