Aussie Drops 1% as US 10-Year Yield Tops 5%

The Australian Dollar fell more than 1% against the US Dollar on Wednesday. US Treasury yields surged past the 5% threshold, driving the decline. The AUD/USD pair traded at 0.7039 after peaking at 0.7118 during the session.

Investors pushed up expectations for further Federal Reserve rate hikes. The US 10-year Treasury yield jumped 15.5 basis points to 5.11%. This is its highest level since 2007, according to FXStreet data.

Strong US data fuels hawkish bets

US business activity remained resilient in September. The S&P Global Manufacturing PMI rose to 57 from 53.9. The services index also climbed to 58.7, beating market forecasts of 56.

Fed Governor Michael Barr stated that more rate increases may be needed. He cited the need to bring inflation back to the 2% target. This reinforced concerns about energy-driven price pressures.

Market odds for a 25 basis point hike in October rose. They increased from around 52% to 66% for the upcoming meeting. For the December meeting, the probability stood at 93%.

Weak Australian PMIs weigh on outlook

Australia’s September Manufacturing PMI contracted during the period. The Services index slowed down significantly as well. The Composite PMI dropped from 52.7 to 50.8.

Traders now await the August jobs data release. Employment Change is expected to improve from -15.8K to 20K. The Unemployment Rate is forecast to remain unchanged at 4.5%.

Technical levels define near-term range

The pair trades below the triple moving average cluster. This zone sits around 0.7092 and acts as immediate resistance. Price is pressing against a tested rising trend-line support.

The first line of demand is near 0.7040. A clear break under this pivot zone could trigger a deeper slide. A broader set of upward trend lines runs below the market.