Resurgence of the greenback

Being non-farm payrolls week, naturally the greenback will be in focus and it just seems to be gearing up for some renewed strength in the near term.

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.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.