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Forex Market: AUD/USD extends rebound from August 20 trough ahead of Australian GDP, US NFP reports

AUD/USD rose on Tuesday, while extending a rebound from August 20th low of 0.7106 – a 9 1/2-month low, after new data showed that a surge in government spending had facilitated a crucial boost to growth, probably helping the economy avoid recession.

The official Australian GDP numbers for the second quarter are due to be released tomorrow.

“We expect Q2 GDP to grow by 0.5% quarter on quarter… (and) expect the RBA to taper its bond purchases further in November,” economists at Barclays Bank wrote in an investor note.

“Still, the bank retains the flexibility to alter course in response to fresh data as it removes its crisis policy settings, especially in the face of additional and longer lockdowns.”

Meanwhile, the yield on Australian 10-year government bonds dropped 1 basis point to 1.155%.

The US Dollar hovered just above a fresh three-week trough of 92.462 against a basket of six major peers on Tuesday, as investors turn their focus to Friday’s US Non-Farm Payrolls numbers for more clues on Federal Reserve’s tapering timeline.

“The payroll data will be the next highlight given the focus on the Fed’s taper. A strong reading will boost expectations the Fed will give markets prior notice in September before a formal decision in November,” Yukio Ishizuki, senior strategist at Daiwa Securities, was quoted as saying by Reuters.

As of 8:56 GMT on Tuesday AUD/USD was edging up 0.44% to trade at 0.7328, after earlier touching an intraday high of 0.7341. The latter has been the pair’s strongest level since August 17th (0.7341). The major currency pair has retreated 0.18% 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 -17.93 basis points (-0.1793%) as of 8:15 GMT on Tuesday, up from -19.2 basis points on August 30th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7300
R1 – 0.7315
R2 – 0.7334
R3 – 0.7349
R4 – 0.7364

S1 – 0.7281
S2 – 0.7266
S3 – 0.7247
S4 – 0.7228

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