AUD/USD Dips 1.5%, But Stabilizes On Crosses

The AUD was the worst performer in the G10 FX space over the past 24 hours, dropping close to 1.5%. Some support is evident underneath the 0.6920 level, while we currently track at 0.6925. The pair is back below the 50 day MA (0.6962). If we break lower note the July 25^th low comes in at 0.6879.

• Broad based USD strength was evident during the US session as US yields surged on hawkish Fed rhetoric (still work to do fighting inflation). The 2yr yield spiked by 18bps back up to 3.05%. This helped AUD/JPY climb back above 92.00, from earlier lows close to 90.50.
• USD/JPY rebounded as yield moves outweighed lower US equities, although moves were modest on the downside, while the VIX nudged back up close to 24%.
• The AU-US 2yr spread hasn't spent much time beyond -60bps this year, so that will be a focus in early trade in terms of AU yield catch up with overnight moves versus yesterday's dovish RBA hike.
• Commodity markets weren't a focus overnight, but aggregate indices were generally lower. Iron ore edged back to a $112/tonne handle.
• On the data calendar today is final PMI prints for July, while retail sales volumes for Q2 are out. The market expects a +1.2% rise, same as the last quarter. The market will be watching for signs of how much real underlying spending momentum there is (as opposed to higher prices driving nominal spending gains).
• Also note the Q2 NZ jobs report is out in around 30mins. AUD/NZD got close to 1.1000 post the Asia close, but we are now back at 1.1070.