AUD/USD Forecast: Weaker Commodities and Stronger USD Weigh on Australian Dollar
AUD/USD TALKING POINTS
- Stronger USD.
- Weaker commodities prices.
- COVID-19 continues to hamper China.
AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP
The Australian dollar gave back most of its marginal gains seen yesterday as risk on sentiment soured. The U.S. dollar is bid once more while commodities prices have taken a turn lower. Australian specific export commodities are no exception with iron ore and spot gold both in the red.
Exacerbating the AUD’s decline is the fact that China’s COVID-19 woes are back with cases in Shenzhen disrupting the economy once more. This being said, the cases are seemingly sprouting from Hong King leading Chinese authorities to potentially keep the Mainland China/Hong Kong border closed. This demand-side commodity influence has aggravated the Aussies downside.
AUD/USD ECONOMIC CALENDAR
There is not much in the way of Australian specific data but the U.S. will remain in focus later today with several Fed speeches including the Fed Chair Jerome Powell’s first day of testifying. This could result in swings in dollar crosses with likely discussions around inflation and interest rates.
Source: DailyFX economic calendar
AUD/USD TECHNICAL ANALYSIS
AUD/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily AUD/USD shows a decline of roughly 1.2% for the day which may be cut short soon as I do not see much more depreciation leading up to Fed Chair Powell’s testimony.
Key resistance levels:
- 20-day EMA (purple)
Key support levels:
IG CLIENT SENTIMENT DATA: MIXED
IGCS shows retail traders are currently LONG on AUD/USD, with 70% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, recent changes in long and short positioning results in short-term hesitancy.
Contact and follow Warren on Twitter: @WVenketas
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.