AUD/USD dips below 0.78 as RBA jawbones the Aussie

AUD/USD dropped to a session low of 0.7792 after the Reserve Bank of Australia statement said the pick up in economic activity and inflation could be slower that the currency forecasts, courtesy of a strong Aussie dollar.

The central bank expects slow wage growth, high debt to constrain household spending and says, "lower rates continue to support Australian economy".

Yield spread narrows

• The yield differential or the spread between the Aussie and US 10-year bond yield has narrowed to 51 basis points.
• The yield spread chart shows the symmetrical triangle pattern. A downside break could result in a further narrowing of the spread in favor of the US dollar.

AUD/USD Technical Levels

At press time, the currency pair is trading at 0.7798 levels. A break below 0.7771 [100-DMA] would open doors for 0.7749 [March high] and 0.7712 [June 30 high]. On the higher side, breach of resistance at 0.7830 [5-DMA] would open up upside towards 0.7838 [1-hour 100-MA] and 0.7860 [resistance on 4-hour chart].