AUD/USD is holding in bullish territory, eyes on 0.7480

  • Bulls have broken the weekly trendline resistance but face a critical level.  
  • AUD/USD eyes a run to 0.7480 as the last defence for a full-on bullish breakout. 
  • Commodity currencies are bid on the inflation theme and rising prices. 

AUD/USD is up some 0.5% on the day and the pair have travelled from a low of 0.7372 to a high of 0.7426 as the commodity currencies continue to top the forex leader boards on a daily basis. Commodities are strong with the CRB index moving to fresh cycle highs on the day in what has been a monumental rally since April 2020. AUD, in particular, is enjoying a comeback in iron ore prices with a fresh corrective high made at the start of the week.

Evergrande remains a dark cloud for AUD

However, the Evergrande crisis is a dark cloud hanging over the Australian economy and its reliance on its biggest export, iron ore. Prices sat just over $US120 ($164) per tonne of 62 per cent at the end of last week, well below the prices reached in mid-July this year, when they topped $US200 per tonne. Considering the Chinese property shake-out, the fastest and largest iron ore crash in history would be expected to resume its southerly trajectory. UBS estimates there are 10 developers with potentially risky positions with combined contract sales of 1.86tn yuan – or 2.7 times Evergrande’s size. In other words, Evergrande is only the tip of the iceberg.

Chinese construction is likely to fall over the next year and that would be expected to equate to hundreds of millions of tonnes of less steel that will be needed. This would equate to hundreds of million tonnes of iron ore equivalent also. This puts iron ore on track to fall below $100 a tonne and perhaps to even match its 2015 price crash to somewhere below $50 in the near future and weigh heavily on AUD.

USD profit-taking in play

Meanwhile, the US dollar edged down against major peers on Thursday, touching a 10-day low as rising risk appetite and profit-taking ensued at the same time. Producer price growth slowed in September to the lowest level this year as airline passenger service costs plunged. The seasonally adjusted producer price index rose 0.5%, compared with a 0.7% gain in August, the Bureau of Labor Statistics said Thursday. The latest print was the lowest since December and came in line with the consensus on Econoday.

Nevertheless, there are expectations that the US Federal Reserve is going to tighten monetary policy more quickly than previously expected amid an improving economy and surging inflation that had fuelled a rise in the greenback since early September. The minutes of the Fed's September meeting was more hawkish than expected and have confirmed the tapering of stimulus is likely to start as soon as November. The dollar index is back to being flat at the time of writing at 93.999. However, it had met its lowest since Oct 5 at 93.759. On Tuesday this week, it had reached a one-year high at 94.563.

AUD/USD technical analysis

The price is meeting a familiar level on the weekly chart of Sep 2020 which could prove to as resistance and send the pair back to test what is now a counter trendline. A break of the highs, however, will bring in the Sep tweezer top near 0.7480 which guards a full-on breakout to the upside. The market will otherwise be bearish below 0.7220. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD gains traction and climbs above 1.1600 after US data

After dropping below 1.1600 earlier in the day, EUR/USD managed to stage a recovery in the early American session toward 1.1620 with the latest data releases from the US making it difficult for the greenback to find demand. US trade deficit expanded in September and durable goods orders contracted. 


GBP/USD stays in the negative territory around mid-1.3700s

GBP/USD recovered modestly from the weekly low it set at 1.3710 earlier in the day but continues to trade in the negative territory around 1.3750. The dollar is staying on the back foot after the latest data releases but the cautious mood is limiting the pair's upside.


Gold bulls trying to recover the 1,800 mark

Gold is posting modest intraday ahead of Wall Street’s close, bouncing from an intraday low of 1,783.44 and trading below the critical 1,800 threshold. Demand for the greenback eased as yields retreated further. 

Gold News

Shiba Inu price to provide buy opportunity before SHIB doubles again

Shiba Inu price is due for a retracement after rallying 113% in less than three days. The MRI displays a major sell signal, hinting at a correction that could extend 17%.

Read more

Wake Up Wall Street: Microsoft, McDonald's lead futures higher

McDonald's (MCD) quarterly earnings came in before the market opens on Wednesday and delighted on both top and bottom lines. Microsoft reported easy beats on revenue and EPS as well.

Read more