Key points:
The Australian dollar slipped 0.2% to $0.6668 on Wednesday, having briefly rebounded by 0.4% overnight from its six-week low of $0.6648.
Traders appear focused on the $0.6650/60 range, which has emerged as a critical support level, with the 200-day moving average of $0.6628 acting as the next line of defence.
Resistance remains at 67 cents, a level that the Aussie has struggled to break through amid broader U.S. dollar strength.
Picture: The AUDUSD chart shows a bearish trend with negative momentum, nearing support at 0.665 on the VT Markets app.
Meanwhile, the New Zealand dollar fell 0.1% to $0.6036, still hovering near its two-month low of $0.6020. The technical picture for the kiwi remains weaker, as it has failed to climb back above the 200-day moving average of $0.6090, leaving room for further declines.
This bearish tone is weighing on traders’ sentiment, with the kiwi struggling to find momentum in the face of rising global yields and limited domestic catalysts.
See also: Aussie and Kiwi Dollars Hit Multi-Month Lows
The U.S. dollar’s dominance has been supported by surging Treasury yields, as traders position themselves ahead of the U.S. presidential election and pare back expectations for aggressive rate cuts by the Federal Reserve.
The benchmark 10-year U.S. Treasury yield hit 4.222%, driving demand for the dollar and pressuring both the Australian and New Zealand dollars.
In Australia, the Reserve Bank of Australia is now seen as unlikely to cut rates with just a 20% chance priced in by the market. The first potential rate cut is not fully expected until May 2024, a shift in expectations driven by stronger-than-expected labour market data.
This has helped the Aussie outperform against the yen, with AUD/JPY sitting just below a three-month high at 101.04.
Australian bond yields have also risen, with the three-year yield climbing 2 basis points to 3.944%, its highest in three months, while the 10-year yield stands at 4.45%, a 3-1/2 month high and 23 basis points above U.S. Treasury counterparts.
Across the Tasman Sea, the kiwi faces additional headwinds as traders price in a 25% chance that the Reserve Bank of New Zealand could implement a 75 basis point rate cut at its final meeting of the year in November.
This potential easing move continues to weigh on the currency, leaving it vulnerable to further downside in the months ahead.
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