Australian dollar extends losses

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 Ukraine 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 Ukraine 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.

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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

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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