Right now, the pair has one thing working in its favour for a move higher. But that particular factor is two-fold and so that amplifies the potential for a stronger relief rally in AUD/USD at the moment. Since the drop below 0.6500 in August, the pair has been caught in a downwards channel but is looking to come up for air now after being kept under for over two months:
AUD/USD daily chart
That’s a significant technical development and could see buyers extend the push higher today. However, the 0.6500 mark continues to be a limiting factor in terms of impeding the upside momentum. As such, buyers will have to break above that and now the 100-day moving average (red line) at 0.6517 before really convincing of a stronger turnaround.
Going back to the factor that is providing the tailwind for AUD/USD, it is the retracement/squeeze in Treasuries at the moment. The bond market rout is being called into question and a fall from 5.00% to now 4.72% in 10-year yields is not only dragging down the dollar, but it is also underpinning risk sentiment and that is a positive factor for the aussie.
As such, AUD/USD buyers can see this as hitting two birds with one stone. From a technical standpoint, we should see a retest of 0.6500 at least. As for any run further, that depends on the bond market.