Aussie Dollar Vulnerable at Key Support Amid Iron-Ore Meltdown

aussieA person holds Australian dollar banknotes of various denominations for a photograph in Sydney, Australia, on Thursday, July 24, 2015. Photographer: Brendon Thorne
  • Aussie Dollar Vulnerable at Key Support Amid Iron-Ore Meltdown

Aussie dollar bears may drive the currency further down to break key technical support at the Fibonacci retracement level of 0.7385, or 73.85 U.S. cents, amid a rout in iron ore, Australia’s top commodity export, chart patterns suggest.

The iron ore contract on the Dalian Commodity Exchange has slumped 10% since testing its key 541 yuan a ton resistance this week and was largely responsible for the Aussie dollar’s biggest one day drop since Donald Trump won the U.S. election.

Daily momentum readings on iron ore are at levels that permit more downside, with next respite area seen 8 percent from current spot level, the 200-day moving-average at 446 yuan per ton.

With a 70 percent positive correlation between the Aussie dollar and iron ore, over a 30-day rolling period, downside risks to the raw material keep currency traders firmly focused on the prospect of the support breakdown. Sellers may have legitimate reasons to question the pessimistic outlook should the Australian currency recover above its 200-day moving average at 0.7551 U.S. cents Thursday.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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