Aussie collapse continues as anxiety continues to fuel liquidity push

AUD - Australian Dollar

The Australian dollar collapse continued through trade on Wednesday, extending the shift below 0.60 US cents and touching intraday lows at 0.5702. Equities plunged lower, while oil fell sharply again as the risk off mood intensified forcing investors toward haven assets and driving the USD higher. A broader push for liquidity has prompted a strong US dollar resurgence and driven the AUD sharply lower through the last fortnight. Investors are panicking and seeking shelter in world’s base currency, as equity and commodity prices tumble. While, central banks around the world have attempted to shore up money markets and inject record levels of liquidity, there is a real fear Fed swap lines won’t extend far enough to fill the void created in this unprecedented vacuum.

Having touched 17 year lows the AUD remains vulnerable to further downside risk as fear breads fear and markets seemingly loose all rational. With little in the way of traditional support or resistance handles guiding direction and volatility rising by the day questions as to where the bottom may be become increasingly difficult to answer.

Attentions today turn to the RBA, as the central bank is tipped to issue an out of cycle rate cut and announce QE measures to ensure funding remains available to households and businesses, while employment data for February could provide the first real insight into human economic impact of this health crisis as the unemployment rate is tipped to surge toward 10% in the coming months.

Key Movers

The US Dollar enjoyed strong gains through trade on Wednesday, surging higher as liquidity panic flattens risk appetite and prompts investors to buy back USD. Bloomberg’s dollar index jumped sharply, fueled by heavy losses across key major counterparts. The Great British Pound plunged through 1.20, loosing over 5% and touching intraday lows at 1.1526, while the Euro drove through 1.10, bottoming out at 1.0810 before edging marginally higher into this morning’s open.

Panic across financial markets has prompted a run on liquidity and investors are scrambling to buy back into the world’s base currency, liquidating all other asset classes for cash as the global economy grinds to a halt. The US dollar has been the main benefactor of such moves rallying 8% in the past 2 weeks as funding and cash dry up and investors looked to the world’s base currency for stability amid the glut of uncertainty. As market and investor anxiety continues to build, we anticipate recent runs will be extended as rational trading patterns fall by the wayside and fear governs broader market direction.

Expected Ranges

AUD/USD: 0.5510 - 0.5980 ▼

AUD/EUR: 0.5080 - 0.5420 ▼

GBP/AUD: 1.9820 - 2.0280 ▼

AUD/NZD: 0.9920 - 1.0250 ▼

AUD/CAD: 0.8280 - 0.8520 ▼