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Ingredients for a weaker AUD colliding

The AUD remains the key currency to watch at the moment as weakness in iron ore prices continues to mount pressure on the domestic economy.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
AUD/USD
Source: Bloomberg

AUD/USD continues to test the 0.7600 level and if it wasn’t for a disappointing ADP non-farm payrolls print, then the greenback could have continued to gain against the AUD. Iron ore slipped below 50/t and hit 49.57/t with analysts growing increasingly bearish. This will ensure our terms of trade remains on the backfoot and will put today’s trade balance in focus. A wider trade deficit is envisaged and if this reading is worse than expected then we could see pricing for a rate cut next week blow out. The drop in iron ore has seen swaps market price in over a 70% chance of a rate cut next week. The ingredients for a weaker AUD are certainly building and this makes for an interesting week of trading. Additionally, should US payrolls surprise to the upside, then a stronger greenback would be a double whammy for the pair. Traders could eye momentum plays on a close below 0.7600.

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.