AUD/USD to struggle with USD demand and falling commodities

  • Australia showing signs of optimism for the economy, but there is a hard landing on the horizon first. 
  • AUD/USD will suffer from a slump in global demand and hamstring by the USD.

AUD/USD is trading at 0.6287 having travelled between 0.6253 and 0.6346, down -0.77% on the day so far. Commodities are down hard and the US dollar taking back the 100 handle as risk sours heavily following the rout in oil and stark reminder just how bad the global economic situation is. 

The CRB Index is bleeding heavily today, -11% at the time of writing, pertaining to a very grim economic backdrop. Investors are thinking twice about that V-shaped recovery regardless of whether new cases of COVID-19 are ebbing or even that some nations are very slowly easing social distancing measures. These are unprecedented times and there is no real telling at this stage of how deep of a global recession it will be. 

The US dollar is proving its weight at times of volatility (VIX moving higher again) and uncertainty despite the measures taken by central banks to stabilise swap-line liquidity for the greenback. What this means, is no matter how bullish circumstances could be domestically for Australia with respect to a relatively modest COVID-19 threat, (only 13 new cases of COVID-19 were counted in the country yesterday), should a stronger dollar prevail, it might just mean that AUD/USD will be one of the least hurt until other nation's COVID-19 curves begin to flatten. 

Meanwhile, "it may be way too early for politicians and central bankers to start patting themselves on the back, but in Australia, there may at least be room for the first sighs of relief," analysts at Rabobank explained and added:

"PM Morrison has declared that the country has reached a turning point in the fight against the coronavirus with the result that some non-emergency medical procedures will be allow to resume. On May 11 some states are already looking to re-open schools and lift other restrictions to allow businesses to reopen. 

The RBA also appears to have had success in weathering the initial phase of the crisis well, with levels of stress in the money market having abated and the size of its QE purchases already scaled back."

Aussie economy to suffer the fate of all nations combined to COVID-19 lockdowns

However, while the USD is a factor, the Aussie economy is headed for a hard landing. Indeed, Australia has been fortunate to avoid the catastrophic impact that COVID-19 has had on Europe and the US, especially considering how adjoined the nation is to China in both proximity and trade, however, there lies a critical case in point.

Australia relies on China to buy its exports and has enjoyed a good run dealing with China which has been in expansion for the past 28 years ever since it started reporting quarterly GDP figures. However, the March quarter just ended and the contraction came in at 6.8% on Friday reflecting the shutdown cost to the economy. 

AUD trades as a proxy to global growth, demand and commodities in trade. With the oil price shock, it is a stark reminder of the demand story in the global economy and that will filter through to key markets for Australia, such as coal, iron ore and copper. All of these markets are going to struggle which will ultimately weigh on AUD.

So, no matter that Australia could have one of the easiest service economies to bounce back, (limited COVID-19 impact), the grander macro picture is an entirely different matter and that is where the focus should be with regards to Australia's position in this global crisis. 

AUD/USD levels

"Although the RBA has managed to tone down the size of its weekly bond purchases already, this is a policy that is set to remain in place for some time and low rates will remain in place for even longer. We see risk on another dip below AUD/USD0.60 on a 1 to 3 month view,"

– analysts at Rabobank argued.


Today last price 0.6287
Today Daily Change -0.0049
Today Daily Change % -0.77
Today daily open 0.6336
Daily SMA20 0.6196
Daily SMA50 0.6345
Daily SMA100 0.6601
Daily SMA200 0.671
Previous Daily High 0.6398
Previous Daily Low 0.6332
Previous Weekly High 0.6445
Previous Weekly Low 0.6264
Previous Monthly High 0.6686
Previous Monthly Low 0.5509
Daily Fibonacci 38.2% 0.6357
Daily Fibonacci 61.8% 0.6373
Daily Pivot Point S1 0.6313
Daily Pivot Point S2 0.6289
Daily Pivot Point S3 0.6247
Daily Pivot Point R1 0.6379
Daily Pivot Point R2 0.6421
Daily Pivot Point R3 0.6445



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.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

AUD/USD wavers below 0.7300 ahead of Aussie Trade Balance

AUD/USD fades pullback from 0.7264 after marking another failure to cross 0.7340 on D1 closing. DXY rebounds from a 12-week low as US PMIs performed better than EU data in November. Australia’s preliminary Trade Balance for October, RBA’s Debelle can offer immediate direction.


Gold in bearish consolidation below $1840, remains vulnerable

Gold (XAU/USD) is nursing losses in Tuesday’s Asian trading, having slumped 2% on Monday to reach the lowest levels in four months at $1831. Vaccine progress, stronger US data hammer gold prices. Focus on vaccine updates and risk sentiment for fresh impetus.

Gold news

EUR/USD stabilises beneath 1.1850 as focus shifts to German IFO data, ECB and Fedspeak

EUR/USD is consolidating beneath 1.1850, having seen a decent bounce from post-strong US PMI data lows of 1.1801. Despite setting hitting both its highest and lowest levels in more than a week on Monday, EUR/USD is now back within last week’s range.


Bitcoin risks a correction to $12,000

Peter Brandt, author, and publisher of the Factor Report, has exited around 50% of his Bitcoin position. The veteran trader believes Bitcoin might be poised for a correction to $12,000 in the near future.

Read more

Black Friday 2020 Discounts!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info