Sean Callow, Research Analyst at Westpac, explains that the AUD/USD has traded a 1 cent range in this week and suggests that the commodities are supportive of further A$ recovery but there could be some caution ahead of the 20 October by-election.

Key Quotes

“There was cause for optimism over the Australian dollar early this week.”

“Less helpful though for the Aussie’s attempt to rally from 32 month lows near 0.7000 was the poor sentiment in Chinese equities. This was initially only a background concern for AUD but equity weakness was much harder to ignore on Wednesday when US markets posted their largest losses since February.”

“Commodity prices suggest AUD/USD should push higher and there are calls in Chinese media for fiscal stimulus to support growth as Chinese exporters struggle with US tariffs. But it may be hard for the Aussie to recover above 0.72 if equity markets remain jittery and with Australian political uncertainty elevated ahead of the 20 October by-election.”

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