AUD/USD extended a rebound from 41-week lows on Tuesday, supported by a 3% surge in iron ore prices and some weakness in the US Dollar, as market focus turns to the Jackson Hole convention hosted by the Federal Reserve.
Market risk sentiment improved after the US Food and Drug Administration granted full approval to the COVID-19 vaccine, developed by Pfizer and BioNTech, an act that could speed up the vaccination campaign in the United States.
“The recovery in currencies is fuelled by short covering especially the oversold commodity currencies,” Philip Wee, DBS Bank foreign exchange strategist, was quoted as saying by Reuters.
“This is likely to be limited … (and) a consolidation rather than the start of a trend reversal.”
The Aussie has recently been pressured by lower commodity prices and the spread of the Delta variant of the novel coronavirus, with nearly 60% of Australia’s population being under lockdown.
Meanwhile, the yield on Australian 10-year government bonds rose 3.6 basis points to 1.137%, while that on Australian 3-year bonds went up 2 basis points to 0.219%.
Market players are now expecting a speech by Fed Chair Jerome Powell on the economic outlook at the annual Jackson Hole symposium on Friday, as they will look for more clues over the timing and pace of the central bank’s bond-purchasing program tapering.
As of 8:43 GMT on Tuesday AUD/USD was edging up 0.29% to trade at 0.7226, while moving within a daily range of 0.7201-0.7238. Last week the Forex pair slipped as low as 0.7106, which has been its weakest level since November 4th 2020 (0.7048). The major currency pair has retreated 3.61% so far in August, following another 2.07% loss in July.
Bond Yield Spread
The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled -21.35 basis points (-0.2135%) as of 8:15 GMT on Tuesday, down from -19.9 basis points on August 23rd.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 0.7182
R1 – 0.7244
R2 – 0.7281
R3 – 0.7343
R4 – 0.7406
S1 – 0.7146
S2 – 0.7083
S3 – 0.7047
S4 – 0.7011