Post Yellen rally contradicts the drop in AU-US 10-yr yield spread
AUD/USD found takers at the 10-DMA level of 0.7633 on Wednesday and witnessed a solid rally to a high of 0.7746 (Asian session high).
Yellen’s dovish testimony on Wednesday triggered broad based USD selling, which pushed the AUD/USD higher. However, the bond yield differential hasn’t actually moved in favor of the US dollar.
The spread/difference between the Aussie 10-yr bond yield and the US 10-yr Treasury yield fell from 45 basis points on Wednesday to 38 basis points as of today. The fact that yield spread actually narrowed in favor of the USD puts a question mark on the sustainability of the 100-pip rally in the AUD/USD from 0.7633 to 0.7746.
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