The single currency has been the primary driver of the volatility in FX, given traders have been responding to various events across the eurozone. Greek election results were the latest event to drive markets and resulted in a risk-off tone that hurt the AUD. AUD/USD remains under $0.8000 after trading to a low of $0.7859 yesterday. The pair is now back at around 0.7917 and while it has recovered, it is still facing a number of challenges.
From a fundamental perspective the pair is facing a number of risks, including declining iron ore prices which will continue to hit our terms of trade. NAB business confidence today showed some signs of improvement and this week we also have CPI and PPI data due out. All these readings will help shape up interest rate expectations as we head into next week’s RBA meeting. There will continue to be growing calls for a cut.
Given AUD/USD looks like it is gearing up for a short-term bounce, I feel traders are better off waiting to sell the pair on strength. Any moves into the 0.8000 region are likely to present selling opportunities in anticipation of a more dovish RBA at next week’s meeting.