AUD slides on weaker commodities

The AUD has been the whipping boy lately and continues to find sellers as global growth concerns hit risk sentiment.

Australian Dollar
Source: Bloomberg

Yesterday’s disappointing China imports reading set the tone for the AUD and it just keeps getting worse. Two of Australia’s key commodities, crude oil and iron ore, have been consistently under pressure and this will hurt our terms of trade. Unless China deploys stimulus it certainly doesn’t seem as though the anticipated recovery in activity in the back end of the year will eventuate. Locally, NAB business confidence and conditions dropped off significantly after having shown some signs of a recovery the previous month. AUD/USD's losses accelerated on the back of the data and it is clearly a momentum play right now as the pair races southbound. With the price action now firmly below $0.8300, the pair is trading at its lowest since July 2010 and traders will be eyeing May 2010 lows in the $0.8067 region. There will be plenty of focus on China with plenty of economic data due for release this week. I feel risk will be largely pinned on how China responds to the raft of data releases. In terms of trading opportunities, traders who aren’t already short could consider selling rallies back into $0.8300. There is a reasonable chance May 2010 lows will be tested in coming weeks, particularly if next week’s Federal Reserve meeting takes a hawkish shift.    

AUDUSD
Click to enlarge

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts