Australian Dollar Inches Up Despite Strong US Dollar and High Yields

The Australian Dollar (AUD) is making slight gains against the US Dollar (USD) on Monday, trading near 0.6970, up 0.34% for the day. Despite this advance, the AUD/USD pair faces headwinds from a resilient US Dollar, which remains strong due to elevated Treasury yields and a weaker Euro (EUR).

In the United States, recent economic data show mixed signals. The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) fell to 54.9 in September from 55.4 in August, slightly below market expectations of 55. However, the index remains above the 50 threshold, indicating continued expansion. Details reveal rising inflationary pressures, with the Prices Paid Index climbing to 74.0 from 72.6, while the Employment Index improved slightly to 50.1 from 47.8. The New Orders Index dropped to 59.8 from 60.9.

The final S&P Global Services PMI was revised higher to 58.8 in September from the preliminary estimate of 58.7, suggesting robust economic activity. However, these data were not enough to halt the US Dollar's rise. The US Dollar Index (DXY) surpassed 102.50, reaching its highest level in 18 months, driven partly by Euro weakness due to concerns over French debt. The spread between French and German 10-year government bond yields hit around 150 basis points, the widest since 2011.

US Treasury yields remain elevated, with the 10-year yield holding near 5.30%, close to its recent peak of 5.34%, the highest since 2002. This provides additional support for the Greenback. On the technical front, AUD/USD is trading at 0.6968, holding a mildly bullish near-term bias as it sits above key support levels. Resistance is seen at 0.6980 and 0.6988, with further levels at 0.7005 and 0.7045.