AUD/USD: Accentuated Divergence W/Yield Spreads Amid Risk-Off

The Aussie is starting to look cheap if accounting for capital flows in search of yields as the bond yield differential between Australia and the US improves further…

The next focal point includes the US NFP figures. One must be prudence if exposure heading into the high-impact volatile event. A headline number of 181k is expected.

However, in an environment of ‘true risk off’, the drop in equities (rising correlation) alongside the strength in the DXY so far counterbalances the positive yield spread development.

The micro and macro trend derived off price action still argues the path of least resistance remains lower even if major buy-side interest is expected at 0.70c.

Any signs of strength in equities or fixed income that may relax the ‘true risk off’ conditions may provide a genuine buy-side opportunity around the round number, but remember US NFP.