AUD/USD tanks, bond yield spread breaks lower on dismal Aussie retail sales

The offered tone around the Aussie gathered pace, pushing the AUD/USD below the 1-hour 50-MA level of 0.7836 after the Aussie retail sales unexpectedly contracted by 0.6% in September.

Markets were expecting retail sales to grow 0.3%. Meanwhile, Aussie trade surplus widened to AUD 989 million, beating the estimate of AUD 850 million. Import growth stalled, while exports rose 1% m/m seasonally adjusted.

The AUD is really under pressure as the dismal retail sales print saw the Aussie-US 10-year yield spread narrow to 447.6 basis points [bps]. The yield spread chart below shows a bearish symmetrical breakdown, i.e. the spread could continue to narrow further in favor of the US dollar ...

Yield spread daily chart - Symmetrical triangle breakdown

AUD/USD Technical Levels

At press time, the currency pair was trading at 0.7834. A break below 0.7821 [38.2% Fib R of May 9 low - Sep 8 high] would expose 0.78 [zero levels] and the upward sloping 100-DMA of 0.7779. On the higher side, a move above 0.7855 [1-hour 50-MA] would open doors for re-test of 0.7864 [1-hour 200-MA] and 0.7875 [previous day's high]