Commodities are already feeling the pinch it seems and this is hurting related currencies such as the AUD. In fact AUD/USD has dropped significantly, falling back below 0.7800 and looking like it is poised for further losses. The pair is now testing 0.7700 and last traded this low on March 20. Politicians have stepped up budget rhetoric and this also seems to be having a negative impact on the AUD. This makes this week’s trade balance data very important as we’ve been hearing quite a lot of negative chatter around declining terms of trade. A wider trade deficit is envisaged and this will give a clearer picture of what falling iron ore prices mean for us. This will also result in interest rate cut timing repricing and with key commodities falling heavily along with declining activity from China, many are betting on the AUD going lower. The 61.8% retracement of the rise from March lows to March highs near 0.7940 comes in at 0.7700 and I feel a close below this level could trigger the case for fresh shorts.