But the recent divergence between terms of trade and the aussie highlights the impact of yields in the currency story right now
If there is one thing that is working in the aussie's favour since the start of last year, it is the fact that the country's terms of trade is seen improving despite the economy facing struggles in recent times. This is also highlighted by the commodity prices release every month but the chart above provides a better indication of how resilient Australia's terms of trade has been over the past few years.
However, the divergence between AUD/USD and the terms of trade index highlights the sort of impact the yields story has had on the currency pair. Although the aussie may be able to seek some relief from better terms of trade data, the fact that its yields spread continues to get crushed against the dollar means that AUD/USD will stay pressured until things start to improve on that front.
For now, AUD/USD continues to hold above 0.7000 as stops below the figure level aren't really wiped out just yet. I reckon a move below 0.6980 would be required to trigger a sharper downside move. As such, price is likely to do battle around current levels for a while yet ahead of the release of US Q1 GDP data later.
