• AUD/USD wavers in range around 0.7575-90, near to 2021 low of 0.7562 flashed before a few hours.
  • Early Thursday’s risk-on mood faded despite upbeat US data.
  • US Treasury yields recover but can’t stop the greenback’s rally.
  • No major data/events in Asia will highlight risk catalysts, US dollar moves as the key.

AUD/USD fades bounce off three-month lows while easing to 0.7577 amid the early Friday morning in Asia. Although vaccine and stimulus optimism favored the quote initially on Thursday, the US dollar strength and a lack of major fresh catalysts kept bears happy.

King dollar dominates…

Even if the US Treasury yields paused after three days of a downtrend, the greenback bulls held the throne and rose to the fresh high since November 13, 2020. In doing so, the USD praises upbeat GDP and Jobless Claims at home while also cheering the support of safe-haven demand amid fears of tapering. Further, hopes of additional stimulus and vaccine news battle the coronavirus (COVID-19) updates to add strength to the US currency.

Following the initial rejection of the plans to alter the Fed’s bond purchases, Chairman Jerome Powell recently started flashing hints of what could probably lead the US central banks towards such a decision, even if it’s too far. This feared market players of something fishy and strengthened their trust in the US dollar. Though, talks of $3.0 trillion infrastructure spending from the US government battle the pessimists.

Elsewhere, European Commission President Ursula von der Leyen recently said, “We are at the start of a third wave of the virus” while US President Joe Biden pushes vaccination targets. On the same line, AstraZeneca’s phase 3 trials offered a bit lower results of 76% from 79% conveyed earlier but the lesser cost of the vaccine and confirmation of no side-effects triggered vaccine optimism.

On a different horizon, the Iranian missile attacked Israel’s ship and contributed to the geopolitical risk at a time when China and North Korea are already weighing on the mood.

Against this backdrop, the US 10-year Treasury yield rose nearly two basis points (bps), up for the first time in the last four days, to 1.633% whereas the Wall Street benchmarks closed with minor gains.

Given the upbeat US data and recent hints of what could lead the Fed towards QE tapering have the back-up of strong vaccination, the reflation fears can keep the US dollar strong. At home, a lack of drivers may let the AUD/USD sail on the greenback’s wave.

Technical analysis

While sustained trading below 100-day SMA, at 0.7616 by the press time, favors AUD/USD bears, a clear break of a three-month-old horizontal support zone, near 0.7562-55 becomes necessary to magnify the fall.

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