Surging commodity prices may have been responsible for some of the
upward pressure on US Treasury yields overnight. The benchmark 10-year
yield rose a full percentage point as investors ditched US government
bonds. Higher raw material costs are seen as a strong
inflationary pressure in markets, with commodities like iron ore and
copper making significant gains to begin the week.
That said, rising iron prices bode well for the Aussie Dollar due
to it being Australia’s largest export, with China driving much of the
demand. That, along with the weak USD, has put AUD/USD above the 0.78
handle. Speaking of China, the economic powerhouse
is set to report inflation data for April this morning. Analysts expect
a print of 1.0% on a year-over-year basis. The Yuan is unlikely to
react, but the figure will feed into the broader global narrative.
China will also see new Yuan loans data for April cross the wires
later today, with analysts expecting a print of CNY1600 billion. That
would figure will represent a decrease from the prior month, as the
People’s Bank of China (PBOC) continues to normalize
policy amid a strong economic recovery. Outside of China, the
Philippines is set to announce its Q1 gross domestic product.
AUD/USD has given back a sizeable amount of the bullish impulse
over these past few sessions and the bulls need to commit to the purpose
above a critical 38.2% Fibonacci retracement of the daily impulse.
The following illustrates the market structure on both a daily and
30-min time frame. The daily chart shows that the price is under
pressure having rallied way beyond the prior highs. a pullback was
inevitable, but the questions whether the bulls will
commit to where they need to.
A break of the 38.2% Fibo and support structure opens risk to a deeper 61.8% Fibo retracement and restest of the prior highs.
From a lower time frame perspective the outlook is illustrated with the
price already being rejected by the prior support that is now acting as
resistance at a key hour pivot point.
