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AUD/USD – A Fakeout Bounce?
The Aussie staged a strong recovery off the recent multi year lows set over the holiday laden week and raced all the way towards 8500 before running out of gas. However, the sharp rebound may be nothing more that a short covering bounce as the fundamentals against the unit remains substantial. The recent drop in iron ore prices to below $60/ton is likely to have a massive negative impact on the AU economy which receives 1 out of 5 export dollars from that sector. If the slump in commodity prices does not correct soon, the RBA may be forced to consider another rate hike in order to ease the economic pain. Tonight’s meeting ma be key as the RBA could signal a change of posture from its current neutral stance that could bring another round of selling for the Aussie.
Looking at the techs the 8400 level remains the key support and a break there could open a run towards 8250 over the next several sessions. Meanwhile only a break above 8650 alleviates the bearish bias in the pair.