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forexAustralian dollar extends losses

Started by forex,, Mar 08, 2022, 02:47 pm

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Australian dollar extends losses

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The Australian dollar continues to show strong volatility. After posting gains of 2% last week, AUD/USD has reversed directions and given up half of these gains early in the week.

There are two factors which are putting opposite pressures on the Australian dollar. The currency is a commodity-based asset, and the surge in commodity prices buoyed the Aussie last week, as Australia has many commodities which are in  increasing demand in global markets as a result of the e war. This week, however, risk-aversion flows have strengthened and sent the Australian dollar on its heels, as the currency is risk-sensitive. AUD/USD has fallen below the 0.73 line and the currency is vulnerable to a deeper correction in the short term.

Business confidence jumps

Domestically, there was positive news as business confidence strengthened in February. The NAB monthly survey showed business confidence jumped to 13, up from 4 in January. After a miserable December, with a reading of -12, businesses are showing growing confidence in the first quarter. If commodity prices continue to accelelerate in the coming months, business confidence should follow suit.

We’ll get a look at Australia Westpac Consumer Confidence later today. As well, RBA Governor Philip Lowe will speak at a business summit, and investors will be listening closely for any clues with regard to rate policy.

The US dollar index has ticked lower today and is currently at 99.22. The index is heavily overbought, and traders should be prepared for a significant correction if there is positive news out of e or a correction in commodity prices. Still, with the lack of risk appetite and the Fed lift-off for rate hikes fast approaching, a drop in the dollar index will likely be temporary.


AUD/USD Technical

  • There is resistance at 0.7355 and 0.7444

  • AUD/USD has support at 0.7232. Below, there is support at 0.7090

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