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AUD/USD bulls looking for a test of the 0.71 handle

3/13/2019, 2:21:06 PMMarket Analysis
AUD/USD bulls looking for a test of the 0.71 handle

The greenback struggled to stay above water overnight following benign US consumer prices with the headline Feb CPI posting a 0.2% m/m gain while the core index posted a lower than expected 0.1% gain.

"The annual core pace moderated a touch to 2.1% from 2.2%. The National Federation of Independent Business’ small business optimism index posted a 0.5pt gain in February to 101.7, boosted by the reopening of the US government and stabilisation in markets. That’s the first gain in five months though the index broadly remains at historically elevated levels, analysts at Westpac explained. 

Following the CPI data, the US 10yr treasury yield fell sharply, from 2.67% to 2.60%, and the 2yr yield fell from 2.50% to 2.45%. Futures markets priced a 20% chance of a cut by December. 

"AU yields moved lower following a strong rally in UST markets. AU 10yr yields are 6bps off their overnight high, opening this morning around 1.9925%. The curve flattened to 39.75bp but has since returned to the 41.25bp level. Despite the strong performance in AU 10yr yields, US 10yr yields marginally outperformed and widened the AU-US 10yr spread to -60.5bp," analysts at Westpac explained. AUD/USD was subsequently feeling pressures of the daily cloud's resistance.