AUD/USD, AUD/NZD, Government Bond Yields, Technical Forecast -Talking Points
- Rising government bond yields spook investors as Wall Street stumbles
- Australian balance of trade data in focus for Thursday’s APAC session
- AUD/USD, AUD/NZD at key technical levels following AU Q4 GDP beat
US stocks moved lower as Treasury yields spiked, pushing investors into a risk-off stance with the tech-heavy Nasdaq Composite leading the move lower, closing down 2.72% on the day. The Dow Jones Industrial Average lost 0.38% while the S&P 500 closed 1.30% in the red. Small-cap stocks also suffered and the VIX volatility index climbed nearly 10%.
The volatility in Treasury markets spooked investors who are concerned that rising yields are threatening equity valuations despite the economic outlook continuing to brighten. Some money managers are calling for a technical correction, along with the more risk-tolerant retail investor crowd. The 10-year Treasury yield rose over 5%, stopping just shy of 1.500%.
One reason why Wednesday’s climb in government bond yields occurred appeared to stem from the European Central Bank (ECB). It stated that no immediate action to cull bond market activity is needed despite conflicting with earlier messages from policymakers. Germany’s 10-year Bund yield rose over six basis points on Tuesday.
Overall, rising inflation bets have been at the root of the bond market rout. The Federal Reserve’s Beige Book, released early Wednesday, showed that economic activity across most Fed districts picked up from January to mid-February, further strengthening the reflationary theme sweeping markets. Crude oil prices reflected the strengthening economic outlook, rising over 2.5%
Nasdaq, US 10-Year Yield, VIX – 15 Minute Chart
Chart created with TradingView
Thursday’s Asia-Pacific Outlook
APAC equity markets performed well on Wednesday, but rising yields across major economies will likely pressure stocks, as seen on Wall Street. Hong Kong’s Hang Seng Index (HSI) rose 2.70%, followed closely by mainland China’s Shanghai Composite at 1.95%. Japan’s Nikkei 225 closed 0.51% higher while Australia’s ASX 200 recorded a healthy 0.82% gain.
The Aussie-Dollar moved lower against the Greenback overnight despite Australia’s better-than-expected Q4 GDP print. According to the Australian Bureau of Statistics (ABS), the economy grew at 3.1% in the final quarter of the year, bolstered by rising iron ore prices and strong consumer spending. The Australian Dollar will receive another impact event in the form of trade data, with the DailyFX Economic Calendar showing a forecast of A$6.5B for January.
AUD/USD Technical Outlook
The Australian Dollar broke below its 20-day Simple Moving Average (SMA) versus the US Dollar overnight and is moving towards trendline support from its November swing low. If support breaks, the 50-Day SMA will be in focus, and the 61.8% Fibonacci retracement level shortly below that. Bulls may enthusiastically defend the multi-month support trendline as seen earlier this week.
AUD/USD Daily Chart
Chart created with TradingView
AUD/NZD Technical Outlook
The Australian Dollar fared better against the New Zealand Kiwi over the last 24 hours, but the 61.8% Fibonacci retracement from the January to February move appears to be providing a level of resistance. The rising 20-Day SMA may offer some support after making a bullish crossover above the 50-day SMA. A break above the Fib level will bring a descending trendline into view. To the downside, the 38.2% Fib could be a test for bears.
AUD/NZD Daily Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwateron Twitter