AUD/USD - Highest daily close since September

• AUD/USD closed above 0.80 - highest close since September 20. 
• Treasury yields continue to march higher in USD-positive manner. 
• Will Aussie hold above 0.80?

Despite the relentless rise in the treasury yields and the overbought conditions, the Aussie dollar closed above 0.80 yesterday - its highest close since September 19. 

As of writing, the AUD/USD pair is trading at 0.8005 levels and the 10-year US Treasury yield is flatlined at 2.66 percent. Meanwhile, the 2-year yield is trading at 2.07 percent. 

The 2-year treasury yield has risen close to 80 basis points since September. Analysts at Westpac writes, "At +206bp the 2yr DXY weighted spread is at its most supportive levels since 2006". Also, the long duration yields are moving just as strongly in favor of USD.  Still, the USD refuses to catch a bid. The breakdown in correlation looks unusual, although Westpac says the USD’s responsiveness to yield spreads shifts around a lot over time. And, while the USD’s responsiveness to firming yield spreads is very low at the moment it has been even lower in the past."

Accordingly, the correlation may strengthen again helping USD recover some lost ground against the Aussie. Also worth noting is that Aussie 2-year yield no longer yields more than its US counterpart. Hence, AUD/USD may have a hard time holding above 0.80. 

AUD/USD Technical Levels

Immediate resistance is pegged near the 0.8035 levels.  A violation there would expose resistance at 0.8070 and 0.8100 levels. On the flip side, retracement back below the 0.80 handle, leading to a subsequent break under 0.7980 level (yesterday's lows), could accelerate the fall towards 0.7940 support en-route the 0.7900 round figure mark.