Australian dollar / US dollar Analysis and talking points
AUD/USD rallies fade away
Aussie short-covering prompted a modest recovery in the currency to regain the 0.70 handle. However, as risk sentiment continues to fray, higher beta currencies will continue to struggle, so the tendency for AUD/USD rallies to fade remains. Meanwhile, in light of reports from the Financial Times, China looking to boost its iron ore imports in order to increase its pricing power over the industry is a negative catalyst for Australia. remind that, China is the world’s largest consumer of iron ore with its uptake Around 70% of global production, with Most of them were supplied by Australia. Therefore, China’s moves to increase its influence on prices will be of concern to Australia given that it is its largest export.
Technically, the momentum continues to indicate that the risks are tilted to the downside for the AUD/USD pair. Resistance at 0.7050-70 is an area that fades to the upside, while a close above 0.7135 (pre-CPI level) indicates that we may have found a short-term bottom. On the downside, support is at 0.6840-50.
AUD/USD: daily time frame
Downside risks of the Australian dollar / Swiss franc still exist
Elsewhere, after yesterday’s surprise SNB rate hike, the Swiss franc’s rally is likely to continue across the board, and therefore I expect further declines in the AUD/CHF. Especially since the SNB no longer perceives the CHF as highly valuable and is ready to intervene if the CHF weakens. While we are already seeing the cross some big numbers below the previously announced levels, there is room to move towards 0.6400-0.6500. Not to mention the fact that in times of risk aversion, the Swiss Franc would be a good way to hedge.
AUD/CHF Chart: Weekly Time Frame