AUD suffers most in first week of 2020
AUDUSD closed at 0.68684: 2.3% lower than its multi-month high 0.70319 on 31 December 2019. Tuesday was the Aussie’s fifth consecutive day of losses, making it the worst performing G10 currency in the last five days.
The AUD gained late December on the back of gentle USD selloffs, soon to be pulled back from its gains amid the devastating Australian bushfire crisis. The greenback also started a comeback as global manufacturing data started to look up, despite last week’s ISM print: the lowest since 2009.
Then headlines reporting that Iran had fired rockets at a US-Iraqi air base, saw investors seek safe havens as tensions ramped up. This weighed on the Aussie dollar, which dropped to a three-week low of 0.6850 before bouncing back on better-than-expected Building Approvals (-3.7% vs -11.7% forecast).
Another downside risk is increased expectations of a rate cut at the RBA’s next policy meeting on 4 February. Implied probability of a 25 basis point cut sits currently at 63.8%.
On the daily chart, AUDUSD is pulling back to the 100-day EMA, and testing the 61.8% Fib retracement level of the rally that started late November. A break below here should pave the way to testing 0.6848, the long-term downtrend since December 2018.
Keep an eye on the US-Iran tensions, as heightened conflict will weigh further on the AUD. Also watch for Australian Westpac Consumer Confidence due tomorrow.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.